Proof-of-Work, or PoW, (the proof of performance of work) is an algorithm of reaching consensus in a blockchain; he is used for confirmation of transactions and creation of new blocks. By means of PoW miners compete with each other for completion of transactions in network and for remuneration.

Net surfers send each other digital tokens then all transactions gather in units and register in the distributed register, that is in a blockchain. But in case of confirmation of transactions and the organization of units it is necessary to be careful.

Network functioning is based on the decision of difficult mathematical tasks and an opportunity to easily prove that the decision is received.

What for "the mathematical task"?

It is one of the problems requiring the considerable computational capability. There is a lot of such problems:

• Hashing function, or attempt to find input data, considering days off;
• Expansion of an integral number on multipliers;
• "Puzzle for the tourist": if the server suspects the DoS-attack, he demands from the client of computation of hashing functions, sometimes in a certain order, then it is a problem of computation of values of a chain of hashing functions.

In a case with PoW hashing is used.

In process of growth of a network of a problem become more serious, and hashing algorithms require the increasing computational capability so complexity of the task — a current problem.

How it is arranged?

Accuracy and speed of a blockchain depends on this mechanism. At the same time the problem shouldn't be too difficult — in this case generation of the block will take a lot of time, so, in network will "expect" many incomplete transactions. If the problem can't be solved for predictable time, creation of blocks will become a lucky coincidence.

If the problem is solved too simply, it does system vulnerable for abuses, spam and the DoS-attacks.

The decision has to be easily checked, otherwise not all knots will be able to understand whether calculation has correctly been carried out, so, they should trust other knots that won't be coordinated with one of the most important principles of a blockchain — full transparency.

How this algorithm is realized in a blockchain?

Miners solve a problem, form the new block and confirm transactions. The complexity of a task depends on the number of users, the current power and load of network. Besides, the hash of each block contains including a hash of the previous block that increases safety and makes impossible violation of an order of the created blocks.

If the miners has managed to solve a problem, the new block is formed — in him the next set of transactions is placed, and they are considered as confirmed.

Where the proof of performance of work is used?

 Of course, the most known of them — the bitcoin, and bitcoin has set this tendency. Here the algorithm Hashcash allowing to change complexity of a task depending on the general computing power of network is used. The average time of formation of the block is 10 minutes. The similar system is realized in similar to bitcoin cryptocurrencies, for example, in the litecoin.

Other large project where PoW is used, is Ethereum, and considering that nearly three quarters of all a blockchain projects are implemented on this platform, it is possible to tell with confidence that the majority of applications are used consensus model with the proof-of-work.

What shortcomings at this algorithm?

Main problems: huge expenses, "uselessness" of calculations and "attack of 51%".

Difficult calculations require specialized and expensive computer equipment. Expenses it is uncontrollable grow, and the mining becomes possible only for big groups of mayner. Besides, specialized computers consume the mass of energy that increases expenses. From this gradual increase in centralization of system as it is favorable turns out to be consequence. And it happens in a case to bitcoin.

Maynera perform work on creation of blocks, in passing consuming huge amount of energy, but calculation which they do, are absolutely useless in itself. Yes, they guarantee safety in network, but their results can't be used in business or in science.

What is "attack of 51%"?

The attack of 51% or the attack of the majority is possible in a situation when the user or group of users control the most part of capacities of network — it gives them the chance to control the events happening in network. So, they can monopolize creation of new blocks and earn all reward as in their power to prevent other mayner to finish blocks.

Besides, they can cancel transactions.

We will assume, Dolores has sent to Bob money through a blockchain. Dolores participates in the attack of 51%, and Bob - No. Their transaction is located in the block, but attacking don't allow the translation to take place. There is a bifurcation of a blockchain.

Further the attacking mayner join one of branches, and as they have more computing power, their chain contains more blocks.

The network is arranged so that longer chain is accepted, and short deviates, so, the transaction between Dolores and Bob hasn't taken place, and Bob hasn't received money.

Here thus malefactors can cancel transactions.

The attack of 51% can hardly be favorable. She demands huge computing resources and as soon as the fact becomes known, the network is considered compromised and users begin to leave her that with inevitability leads to reduction of price of cryptocurrency.