This is part 6 of a series of short cryptocurrency “explain it like I’m five” posts. If you’re just joining us, start here: Crypto ELI5 Part 1: What is a blockchain?
This series of blog posts is meant for the absolute beginner in cryptocurrency. They are also meant to be concise and easy to understand. If you’re interested in learning about crypto, some of the history of crypto, and how to get started with using crypto, follow along! We’ll be adding a new post daily and each post will build on the one previous to it.
What is a proof-of-work?
Proof-of-work is a system that requires a significant but feasible amount of effort to accomplish a task. This concept was adapted to cryptocurrency security by Hal Finney in 2004 and Bitcoin became the first widely adopted application of Finney’s idea in 2009. In Cryptocurrency, the ‘work’ takes the form of an arbitrary math puzzle.
The purpose of proof-of-work is to deter malicious behaviors from hackers, scammers, and spammers. The idea is to make it extremely difficult to game or even overtake the system, by requiring lots of computing power and effort to do so.
Proof-of-work is used by cryptocurrency for validating transactions and mining new tokens. Proof-of-work allows transactions to be processed securely without the need for a trusted third party. It is the mechanism that allows for decentralization in some cryptocurrencies.
Check out the next installment in this series: Crypto ELI5 Part 7: What is a crypto exchange?
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