Highlights
- Proof-of-Work adds the feature of trust and security to the blockchain.
- When miners follow PoW, it offers them an incentive in the form of a reward for new blocks.
- Proof-of-Work works to prevent and solve the "double-spending problem.
Proof-of-Work (PoW) is a decentralized system that verifies transaction accuracy on the blockchain network. Additionally, Proof-of-Work eliminates the need for a central authority such as the government or a bank to manage transactions and their corresponding accounts.
It requires miners (members) to put in their effort and time to solve mathematical puzzles to validate transactions. Bitcoin, Monero, and Litecoin are a few examples that use the Proof-of-Work consensus.
The importance of Proof-of-Work Proof-of-work (PoW) works intending to prevent and solve the "double-spending problem,". This concern is prevalent in most online transactions as they are easy to replicate. The double spending problem can be tricky without a central authority.
If the user double-spends their coins, it can lead to an inflation in the overall supply. Furthermore, it debases the currency, eventually making it worthless and unpredictable. Along with this, following PoW protects the blockchain's network in the following ways:
The Advantageous side of Proof of Work
To attack, a hacker needs access to 51 per cent of all computer nodes on the network. Hence, it is termed a 51 per cent attack. The hacker must change the previous block to corrupt or modify the network.
However, to mount an attack, there is a cost. So, the potential reward may not be worthwhile if the network is large. Alternatively, some other networks are much smaller and would cost much less to hack.
Bottom Line Proof-of-Work makes blockchain secure and allows the network to function with sustainable and distributed consensus.
To ensure the addition of new blocks to the blockchain, PoW makes sure that miners are doing a significant amount of computational work to establish the genuineness of the new block. Also, in this, the miners are the validators, hence, the blockchain is believed to be trustworthy and accurate.
Risk Disclosure: Trading in cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory, or political events. The laws that apply to crypto products (and how a particular crypto product is regulated) may change. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading in the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. Kalkine Media cannot and does not represent or guarantee that any of the information/data available here is accurate, reliable, current, complete or appropriate for your needs. Kalkine Media will not accept liability for any loss or damage as a result of your trading or your reliance on the information shared on this website.
