Proof-of-Work (PoW)

Proof-of-Work (PoW) is a term that describes a type of consensus algorithm, which constitutes a process that is used to reach an agreement on a single data value.

PoW helps deter denial-of-service attacks and other forms of service abuse, most notably spam on a network by requiring some work from the service requester.

On a blockchain network, consensus algorithms are used to confirm transactions. They ensure that each block (bundle of data) that is added to a blockchain (public ledger) is the singular version of the truth, which prevents fraudulent transactions and other kinds of tampering.

PoW algorithms require the computers that uphold the network and process transactions (called nodes) to solve complex equations in order to reach consensus.

In exchange for their work, they receive rewards in the form of crypto tokens. This process is called “mining.”

Criticism of PoW Systems

Miners compete against one another to receive mining rewards, they are automatically selected by the network based on which one of them has the most powerful equipment.

As a result, a PoW-based network can use massive amounts of electricity. The Bitcoin network has been estimated to use as much energy per year as a small county.

This is one major issue governments have with Bitcoin, among others.

PoW systems themselves are not without criticism. It is somewhat controversial as to whether PoW systems can actually solve a particular denial-of-service issue such spam.

For example, solving spam is actually a fairly complicated endeavor as the system must make sending spam emails obtrusively unproductive for the spammer.

These efforts must also not prevent legitimate users from sending their messages.

Bitcoin’s exact hashing power is presently unknown, though it is possible to estimate it from the number of blocks being mined and the current block difficulty.

An estimate of the hash rate of Bitcoin network is calculated by measuring the time in between blocks, or bundles of transaction data that are added to the blockchain.

Thus, the unit of measurement is h/s, or hashes per second. Hash rate, mining difficult, and mining rewards share a correlative relationship to one another on the Bitcoin network.

When the network’s mining difficulty increases, the hash rate follows with the mining reward also increases.