What are Proof-of-Work Blockchains?
Proof-of-Work is a consensus mechanism that was used to design and launch Bitcoin, the first successful cryptocurrency. After Bitcoin, hundreds of other cryptocurrencies used and adapted PoW to launch their own networks.
What is PoW and how does it work?
PoW systems operate with tons of computing power trying to solve simple types of cryptographic puzzles. Every puzzle is a race, and the miner that solves it first is able to validate information on the network and be rewarded for it. After solving the puzzle, a mining node transmits their “work” to the network, and other miners check it to confirm the accuracy of the information received. Then th he block is added to the existing block chain (blockchain), and the information is passed on to other nodes.
Miners are paid in two ways. First, there is a subsidy to fund miners in every block. Also, transaction fees from people using the network are paid to miners.
PoW blockchains aim to produce blocks at constant time intervals. Bitcoin generates a block every 10 minutes or so. The proof of work process is energy intensive, which is why PoW networks are slow and cannot scale as easily as other networks. PoW blockchains are often built to be slower, simpler, and more secure than other faster networks.
Mining to secure PoW networks is a big competition. The more processing power there is in the network, the more the competition increases and the harder PoW (proof of work) becomes. The processing power required to solve ‘proofs of work’ involves a huge consumption of energy (electricity).
Good actors with lots of computing power also makes the mission of a malicious actor who wants to control the network almost impossible. The equipment and electricity costs required to produce processing power equivalent to 51% of the network’s processing power (to be able to control the network in this way) are simply too high to be worth the effort.
Criticism of PoW
One of the major criticisms leveled at PoW systems is that they are high energy consumers. Alternative blockchain systems are designed to use less energy. But Bitcoin’s design is simply one form of network design. Many bitcoin miners rely on electricity from coal, oil, and gas, while others use hydroelectric, wind, and solar power. But as Bitcoin grows, its total energy use is sure to increase in the years to come.
Another criticism of some PoW chains is speed. Bitcoin is relatively slow to other networks, which is why protocols atop Bitcoin were created, like the Lightning Network to try to solve this problem. Other faster PoW chains like Litecoin were also created, but they have not seen as much adoption as Bitcoin.