Proof of work (PoW)
Proof of work (PoW): Proof of work is the way some blockchains, most famously Bitcoin, agree on which transactions are valid. Miners race to solve a maths puzzle using computing power, and the winner adds the next block and earns a reward. Because rewriting history would mean redoing all that work, the record becomes very hard to change.
How proof of work operates
Every few minutes, miners bundle pending transactions into a candidate block and repeatedly run it through a hashing function, changing one small number each time, until the result falls below a target set by the network. Finding that answer takes enormous trial and error, but anyone can check it instantly. The Bitcoin white paper introduced this design in 2008 to stop the same coin being spent twice without a central referee.
Why it is hard to attack
To change a past transaction, an attacker would need to redo the work for that block and every block after it, faster than the rest of the network adds new ones. In practice that means controlling more than half of the total mining power, often called a 51% attack. On a large network such as Bitcoin, the cost of the hardware and electricity makes this extremely expensive, which is the security trade-off proof of work is built on.
Proof of work vs proof of stake
Proof of stake replaces computing power with capital: validators lock up coins and can lose part of them for cheating. As our coaching team explains it in member sessions, a proof of work chain has you chasing an equation, while a proof of stake chain has you put some of your coins at risk. Ethereum used proof of work until the Merge in September 2022, when it switched to proof of stake. Bitcoin still uses proof of work.
What it means for investors
Proof of work ties a network’s security to real-world costs such as hardware and energy, which is why mining activity and hash rate are watched as signs of network health. The main criticism is energy use. Whether that trade-off is worth it is a long-running debate, and understanding it helps when comparing Bitcoin with proof of stake networks.
Frequently asked questions
Does Bitcoin use proof of work?
Yes. Bitcoin has used proof of work since it launched in 2009, and miners still secure the network this way.
Does Ethereum still use proof of work?
No. Ethereum moved from proof of work to proof of stake in September 2022, an upgrade known as the Merge.
Why does proof of work use so much energy?
Miners compete by making trillions of guesses, and every guess uses electricity. The energy cost is part of what makes attacking the network so expensive.