At the heart of every blockchain is its consenus algorithm: the scheme it uses to ensure that every participant agrees that the same blocks are made of the same data and chained together in the same way. Proof of work is the original cryptocurrency consensus scheme. In essence, it works as follows:

  • Transactions on the blockchain are grouped together into blocks
  • Blocks are used to generate problems to be solbed that have the following properties:

    - Solutions are difficult to compute but easy to verify
    - Difficulty of finding solutions is precisely quantifiable
    - Solutions are provably inseparable from the block they secure

  • To verify blocks, blockchain users solve these problems, which is known as mining

  • The first user to successfully mine a block announces the solution to the entire network and is rewarded with cryptocurrency

Each successive block refers to the previous block and creates a chain of blocks, hence the term "blockchain". Although there are multiple blockchains, the correct one is the one that has the most work put into it, which is why solution difficulty has to be quantifiable.

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