In a cryptocurrency network the users send each other digital coins. A decentralized ledger gathers all the transactions into blocks. However, the confirmation of the transactions and the arrangement of blocks are necessary. Proof-of-Work, or PoW, is the default consensus algorithm in a blockchain network and it has been introduced by the revolutionary Bitcoin.
In blockchain networks, this algorithm is used in order to confirm the transactions and produce new blocks to the chain.
So what is mining and what is a miner?
With the PoW approach, individuals who support the network (called ‘miners‘) , use their hardware (usually Graphic Processing Units or CPUs) for solving complicated mathematical puzzles. In reality, the miners compete against each other in order to make the calculations which are required by the network for the creation of each block.
The miners are rewarded for this procedure which is called mining.
More information about PoW
So with the PoW model, the minable coins are created by (and are rewarded to) the miner for successfully verifying transactions on the network. These verified transactions are added into the newly created block on the blockchain every few minutes or seconds. This depends on the network’s block time as this varies for every different cryptocurrency. The reward for each created block of the blockchain is called “block reward”and is given to the miner who made it to solve the mathematical puzzle first.
This ongoing process serves two purposes to the cryptocurrency network.
1. Verifying transactions on the blockchain network and
2. Creating new coins into circulation which a miner receives for successfully validating each new block of transactions. Since a lots of computers engage in mining the network gets more decentralized and it becomes very difficult to attack.
PoW = minable coins
The Proof of Work was originally introduced by Bitcoin and it is the main consensus model that is used by the most “minable” coins in the world of cryptocurrencies.
Some examples beyond Bitcoin are : BitcoinZ, Digibyte, Litecoin, ZCash, ZelCash, SafeCoin, Dogecoin and Monacoin. Of course there are much more as the number of cryptocurrencies is increasing every day.
However many other cryptocurrencies are taking a very different approach for the transaction validation and the blocks creation which is called Proof of Stake (PoS). This leads to the inevitable comparison of minable vs non-minable coins.