Proof of Work System

Bitcoin’s use of a Proof of Work system is one of the defining and unique characteristics it has as a cryptocurrency. It allows for Bitcoin miners to independently try to find the next block, and once they do that miner transmits the solution they found throughout the network. Now, the rest of the network is now being told that the solution for the next block is X, but with Bitcoin, they don’t have to do all of the work that the miner did – they just need to perform a single check that proves the miner did in fact do the work, and the block it found is in fact legitimate.

How is this proof of work check performed? Bitcoin uses the SHA-256 hash function. By hashing the block sent by the miner and checking if it still fits the pattern for the next block, the network can easily prove that the miner did in fact find a block.

Here’s a less technical example. Say Bob wants to prove that he can do a really hard math question. Alice doesn’t know what the answer is, but she know’s that the answer, when put through a SHA-256 hash, is 73475cb40a568e8da8a045ced110137e159f890ac4da883b6b17dc651b3a8049. Bob completes the question and hashes his answer. Alice can then look at Bob’s hash and compares it to the hash she has, and if they are identical, then she knows Bob found the right answer. Alice still does not know the answer or how Bob got that result – but she knows that Bob arrived at the right answer.

Bitcoin uses this type of a system for each block found – and each block relies on including the previously found block in the generated hash. This means as soon as a block is found and propagated through the network, all of the previous ‘work’ performed by miners is now irrelevant.