Proof-of-work allows cryptocurrencies to operate securely
What is PoW?
Proof of work or PoW is a way of verifying cryptocurrency.
PoW uses encryption to provide zero-knowledge proof that can verify cryptocurrency without any further information. This keeps the integrity of the transaction intact.
Zero-knowledge protocol enables one party to prove to another party that they know the value of something without having to give any more information. Because the information is protected, it stops cryptocurrency from being forged or being duplicated by a seller after it has been sold.
Proof of work meaning
Proof of work (PoW) prevents frivolous or malicious use of computing power. It uses algorithms to prevent people from sending spam emails or launching denial of service attacks.
Proof of work was first introduced as a concept in 1999 by computer scientists Markus Jakobsson and Ari Juels.
Proof of work and cryptocurrency
When miners add a block of transactions to the blockchain, they use a proof of work as evidence that they’ve done their job of securing the currency.
Proof of work was first used to secure digital money in 2004. It was pioneered by computer scientist Hal Finney, who developed a reusable proof of work (RPoW) system that could be used to verify digital money.
Bitcoin is based on Finney’s hashtag algorithm system, Hashcash. Bitcoin also uses a P2P protocol – a peer-to-peer platform that allows files to be shared – for tracking the transfer of coins, rather than the hardware computing function used by RPoW.
Proof of work allows cryptocurrencies, such as bitcoin, to operate securely within what is known as a secure decentralised consensus.
The consensus means that transactions can be confirmed and new blocks added to the chain. This system requires a global network of computers to run simultaneously every time a cryptocurrency transaction takes place, however, this leads to high energy use.
What is the point of proof of work?
If users were able to spend their coins more than once, that currency would be worthless. Digital currencies get round this problem by using proof of work.
A proof of work protects the interests of cryptocurrency holders. It operates using standard consensus protocol conditions – mutually agreed rules that effectively regulate the cryptocurrency system.
Is PoW safe?
The computational power needed to solve proof-of-work algorithms requires a great deal of electricity. This amount of energy is both expensive and environmentally questionable. That is why software developers at Ethereum have been working for years to transition to a more environmentally sound proof-of-stake system that eliminates carbon emissions.