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What is Proof-of-Work? (PoW) Meaning


Everything you need to know about Proof-of-Work in cryptocurrency

If you are interested in mining cryptocurrencies and understand how mining works, then it is likely that you have encountered the concept of Proof-of-Work (POW). 

In simple terms, proof-of-work is a collectively shared (consensus) algorithm that validates the transaction verification of a miner. Since mining is the process of verifying transactions, Proof-of-Work is directly related to it.

Proof-of-Work dates back to the publication of the Bitcoin white paper from Satoshi Nakamoto, the pseudonym behind the inventor of Bitcoin.

How Does PoW Work?

First, we have to briefly explain the mining process in order to understand Proof-of-Work.
Since cryptocurrency transactions are decentralized, they need to be verified collectively by computer nodes (miners).

In order for verification to occur, miners solve advanced mathematical problems that provide them with a reference number for the new block of information, called a hash. A new hash block is achieved by inputting the nonce (a number only used once) to the block of information. A new block of information is added to the blockchain approximately every 10 minutes.

Once the block of information is added to the blockchain, other computer nodes need to check if the information on the hash block is accurate by checking the number of leading zeros in the reference number. If the information is valid, then all the other nodes can update their blockchain with the new information.

After the network rewards the miners for their efforts in verifying the transactions, miners compete again to verify another transaction and provide Proof-of-Work.

Proof-of-Work is basically the miner ensuring the verifier that the mining process is valid and accurate. In other words, proving that the process works. The idea behind Proof-of-Work is that solving the algorithm from the miner is really hard, but checking the validity of the verification is very easy.

Proof-of-Work is essential for ensuring the safety of the blockchain since no central authority protects transaction information. By using Proof-of-Work, everyone is involved in the verification of newly added data on the blockchain which cannot be altered by hackers. The only possibility of hackers successfully manipulating the data on a blockchain is if they have access to the majority of nodes, which in fact would be very costly and practically impossible.

Visual representation of Proof-of-Work. Source:

PoW Pros and Cons

Here are the most important pros and cons of the Proof-of-Work system


  • Ensures decentralization
    Proof-of-Work is the solution that Satoshi Nakamoto proposed in the white paper to ensure the proper functionality of decentralized systems. Because of Proof-of-Work, transactions can now be done directly from two entities, without the need of a third party controlling the transaction.
  • Secure
    Proof-of-Work ensures transaction verification in a consensus format, which makes it practically impossible for hackers to manipulate the data on the blockchain.


  • Cost
    A lot of electricity and other technological costs are required for a miner to verify a transaction. However, most of these costs are compensated when the miners are rewarded with free cryptocurrencies for their work. Nevertheless, in countries that mainly use coal as a source of energy (i.e. China), vast energy consumption for verifying big cryptocurrency transactions such as Bitcoin transactions can have negative ecological impacts.
  • Centralized in practice
    Although Proof-of-Work entails decentralization, mining pools determine the computational power of cryptocurrencies, making it somewhat centralized in practice. However, this issue is expected to be resolved in the future.


  • Proof-of-Work is a consensus algorithm that validates the transaction verification of a miner.
  • Proof-of-Work is basically the miner ensuring the verifier that the mining process is valid and accurate.
  • Solving the algorithm from the miner is really hard, but checking the validity of the verification is very easy.
  • Advantages of POW are decentralization and the security it provides.
  • Drawbacks of POW are the cost and the centralization in practical terms because of mining pools.


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