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Definitions and terminology related to cryptoeconomics, blockchain and distributed ledger technology.

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Proof of Work (PoW)

Proof of Work (PoW) is a consensus algorithm used by blockchain networks, including Bitcoin and Ethereum (plans for Ethereum 2.0 include a switch to Proof of Stake). Proof of Work operates through a hashing competition, where each node competes to find a hash value for a block that is less than the dynamically-adjusted target. The first node to generate a valid hash processes the block and propagates it to the network, typically receiving a block reward as compensation for their work. This iterative, randomized process for transaction validation prevents spam and denial of service attacks. There are a variety of hashing algorithms used by Proof of Work systems, including SHA-256 (Bitcoin), Equihash (Ethereum), and Scrypt (Litecoin). PoW may be used in conjunction with the Nakamoto Consensus protocol, as is the case with Bitcoin.