What is Proof-of-Work and why is it important? - Kalkine Media

October 16, 2022 09:02 PM AEDT | By Team Kalkine Media
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  • 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:

  1. When miners follow PoW, it offers them an incentive in the form of a reward for new blocks. Thereon, the miners must work responsibly and properly verify transactions. This must be followed because if it goes wrong, the blocks of those miners will be replaced by other nodes, and they will not receive the reward.
  2. To be a part of the network, miners need a stable power source and a powerful computer to solve problems. For instance, if the miner succeeds in attacking the network itself, the coin price of that blockchain will dump from there, which will affect the miner adversely.
  3. PoW adds the feature of trust and security to blockchain technology. Hence, users can trade Peer to Peer. Everyone can become a miner, as verification will be given to everyone on the network. There is no need for any power or financial strength.

The Advantageous side of Proof of Work

  1. Technological Breakthrough

In cryptocurrency, most mining companies keep looking for effective ways to reduce their costs. Due to this, they have been able to introduce new and cheaper technology for mining. This competition between chipmakers can lead to breakthroughs in computer hardware.

  1. Security

Security is an essential factor in the financial world. A blockchain should be secure and should be able to withstand an attack. PoW facilitates keeping the network secure.

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.


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