Proof of Work

The first consensus algorithm used in blockchains was Bitcoin's proof-of-work (PoW). Proof-of-work fundamentally functions by exploiting a feature of certain cryptographic functions: there are mathematical problems that are very hard to solve, but once they are solved, they are very easy to check. As discussed before, one of these problems is hashing: it's very easy to take data and compute a hash from it, but extremely difficult to take a hash and discover the input data. PoW is most notably used by Bitcoin, Litecoin, and Ethereum.

PoW has the following characteristics:

• Relatively predictable time to solution: Bitcoin's network protocol expects each block to take about ten minutes to solve. If the network starts to solve the proof-of-work problem too quickly, the network will automatically increase the difficulty.
• Resistant to large increases or decreases in computing power: Moore's law suggests that the amount of work computers can do is expected to double every two years. In...