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What is Proof-of-Work (PoW)? – Review, Mining, Comparison with Proof-of-Stake (PoS)

This article will help you to find out how proof of work algorithm works and why it is needed in decentralised blockchains.

What is Proof of Work

Proof-of-Work, or PoW, is a consensus algorithm used in the Bitcoin, Ethereum, Monero, ZCash, and other cryptocurrency networks to verify the legitimacy of transactions

What is a Consensus Algorithm?

A consensus algorithm is the mechanism by which the blockchain verifies the authenticity and integrity of transactions. Its main task is to remove third parties from transactions, which assumes the guarantor’s function. For example, when you buy real estate, a notary and state authorities ensure the transaction’s integrity. However, when you transfer money, it is confirmed by a bank or other payment systems. The notary, the state and the bank charge a fee for their services, which increases the cost of the transaction.

When Satoshi Nakamoto came up with the Bitcoin cryptocurrency concept, he decided to remove the guarantor from transactions, shifting this function to the system itself. It was done because neither the bank nor the notary or the state provided 100% guarantees. At the same time, they increased the cost and duration of the transaction.

To implement his idea, Satoshi Nakamoto used a concept invented by Cynthia Dwork and Moni Naor, which they presented in a 1993 scientific article “On Memory-Bound Functions For Fighting Spam”. It describes an elegant mechanism for dealing with email spam, wherein the sender must pay for forwarding with their device’s processor time.

The fee is so small that ordinary users ignore it, but it should be significant enough to cause spammers’ problems. For example, if the fee is 10 seconds of processor operation, then the spammer should spend about 28 hours on 10,000 emails.

If I don’t know you and you want to send me a message, then you must prove that you spent at least ten seconds of processor time on me and only on this message

Dworkand Naor

At that time, Cynthia Dworkand and Moni Naor’s idea did not gain much support, but the idea was later picked up by Adam Black, who launched the Hashcash system in 1997. This system used the described concept to protect against spam and DoS attacks. Hashcash popularised the concept, and two years later, it was known by its current name – Proof-of-Work. It was introduced by Markus Jakobsson and Ari Jewels in “Proofs of Work and Bread Pudding Protocols”.

How does Proof-of-Work work in the blockchain?

The use of Proof-of-Work in the blockchain (distributed decentralised registry) was, for the first time, described in the Bitcoin whitepaper. Satoshi Nakamoto’s PoW involves using the computers of participants in the system and their computing resources to validate transactions using an asymmetric scheme – the work should be moderately complex (but doable) from the requesting party, but easily verified by the service provider.

That’s why all participants in the Bitcoin system were divided into two groups: miners and full node operators.

Miners are participants in the ecosystem who compete to solve a mathematical puzzle to generate a new block (confirm the latest transactions) and broadcast it to the blockchain network. The winning miner receives a reward in the form of new coins (currently 6.25 BTC per block) and commissions from confirmed transactions.

The probability of winning depends upon the ratio of the computing power of an individual miner’s device and the entire Bitcoin network’s computing power. This rule and the reward for mining are introduced to encourage participants to increase the power of their devices, which in turn increases the security of the blockchain as a whole. The higher the total power of the system, the more resources you need to spend to capture it or hack it, for example, through attack – 51%.

Full node operators are ordinary users who have downloaded the Bitcoin blockchain distribution (approximately 300 GB in size), which automatically checks and distributes transactions and blocks on the network. Such users are the core of the blockchain since they are the servers that ensure the system’s functioning.

Anyone can become a miner and/or a full node operator. However, a single user can perform both of these roles at once.

How to mine in Blockchains with PoW?

Buy the equipment. You can mine cryptocurrency on any computer or smartphone, but this process will be cost-effective only on powerful, specialised devices, ASICs. Here are five such devices:


Hash Power

Power Consumption


Bitmain Antminer S17+

73 TH/s

2920 W


Bitmain Antminer S19/S19 Pro

110 TH/s

3250 W


Innosilicon T3+

57 TH/s

3300 W


Innosilicon A10 ETHMaster

500 MH/s

750 W


MicroBT Whatsminer M30S

86 TH/s

3344 W


Register a cryptographic wallet. You can use any wallet that supports the desired cryptocurrency. It is better if it is a hardware wallet such as Ledger Nano X, Ledger Nano S, Ledger Blue or Trezor Model T. They are more reliable and secure since they store keys inside a USB device.

Select a mining pool. While it is not mandatory, if you connect to a large pool, you can increase your chances of mining cryptocurrency successfully.  You need to choose a pool based on its market share (the more users, the better), how the reward is distributed, and the amount of fees. Here are the five of the largest cryptocurrency pools:

Mining Pool

Market Share

Algorithm of Distribution of Awards





















Install the mining software. If you want to mine cryptocurrency in blockchains with Proof-of-Work, you need to install and configure special software, which can be downloaded from the official cryptocurrency website, on the mining pool page, or from the GitHub repository. Here are a few  programs that HubSpot and BitDegree recommend:

  • CGMiner – considered to be the best.
  • MultiMiner – suitable for beginners.
  • BFGMiner –  offers maximum flexibility and features.
  • Awesome Miner – suitable for small crypto farms.
  • Miner Gate Mobile Miner – a good choice for smartphones.
  • BitMinter – the best cross-platformer.

Start mining coins. Turn on your device and open the coin mining program. Log in to the selected pool and start the mining process.

Proof-of-Work vs. Proof-of-Stake




Bitcoin, Ethereum, Litecoin, ZCash, Monero

Cardano, TRON, EOS, Neo, Qtum, Tezos

Who confirms transactions?



What determines the size of the reward

Computing power of the miner’s device

Number of coins in the validator’s wallet

Generation of new coins

Mining produces new coins

No new coins are generated

What’s the reward for?

Miners are rewarded for generating blocks

Validators receive a сommission for the confirmation of transactions

Energy consumption


Low or medium

Vulnerability to suffering from a 51% attack

Significantly exposed

Almost impossible



Proof-of-Work is the most widely used consensus-building mechanism. It does an excellent job of validating transactions, maintaining network health and rewarding miners for their work. However, it has its drawbacks – the main ones being huge power consumption, vulnerability to suffering a 51% attack and low potential for scaling. According to experts, this will be the reason that soon, new cryptocurrencies will use a different consensus protocol. Old coins will also try to implement a new consensus protocol.

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