Proof-of-Work
Proof-of-Work (PoW), literally ‘proof of work’, is the consensus algorithm that some blockchains rely on to create new blocks. Basically, it is the mechanism by which network nodes can validate and store cryptocurrency transactions. What’s more, after being registered in the blocks, the information on the exchanges will be immutable. Proof-of-Work, in a nutshell, is the process that the Bitcoin network uses to find a decentralised agreement on the authenticity of the data, thus without the need for a central authority.
Bitcoin mining, for example, is based on this mechanism: mining nodes, using very powerful hardware, solve complex mathematical calculations to create a block every 10 minutes. The first node to find the solution to the Proof-of-Work conundrum will receive new BTC as a reward, the amount of which halves every 210,000 blocks because of the Halving mechanism.Â
The aim of the calculations is to find the Hash of the new block, an alphanumeric sequence produced by a cryptographic function. Obtaining the right combination is very difficult: one can only proceed by trial and error because, in addition to processing node data, random numbers have to be generated cyclically until the correct code is found. The hash, in this context, constitutes the true Proof-of-Work: it is the result that proves the validity of the work done.Â
The process requires the use of great amounts of energy, in order to sustain the hardware and computing power required by the nodes. Indeed, with high processing power, comes a higher probability of ‘winning’ for a miner. Proof-of-Work, in this regard, is criticised precisely because of its high electricity consumption and related environmental impact. However, some miners have begun a real ‘ecological transition’: they adopt sustainability measures for Proof-of-Work, choosing renewable sources such as hydroelectric and geothermal energy.
