Proof of Work
PoW is a consensus algorithm used to verify transactions and create new blocks. Its goal is to make it difficult and computationally expensive for malicious actors to modify transactions or add fraudulent blocks to the chain.
PoW, short for Proof-of-Work, is the first consensus algorithm introduced by Satoshi Nakamoto in the 2008 Bitcoin whitepaper. It is used in blockchain networks to ensure the data's validity and integrity, confirm transactions and add new blocks to the chain.
In a PoW system, nodes, also called miners, compete to solve cryptographic puzzles using their computational power. The first miner to solve the mathematical puzzle gets to add a new block to the chain and is rewarded with cryptocurrencies.
The functioning of PoW is based on the concept of hashing. Each block on the blockchain contains a unique hash, which is a mathematical representation of the data contained within the block. The miners use their computational power to generate a hash that matches specific criteria the network sets. The criteria for a valid hash is known as the "difficulty level," which is adjusted to ensure that it takes a specific amount of time to solve the puzzle and add a new block to the chain.
Specifically, the puzzle requires the miner to find a value that, when hashed together with the contents of the block, produces a hash with a specific number of leading zeroes.
The miner starts by randomly selecting a value and hashing it with the contents of the block. If the resulting hash does not have the required number of leading zeroes, the miner sets another value and repeats the process. This process continues until the miner finds a value that produces the correct hash.
Once the miner has found the solution, the block is added to the blockchain, and the miner is rewarded.