What is Proof-of-Work mining?
Proof-of-Work, or PoW, is one of the basic ways of emitting new coins to a cryptocurrency infrastructure while maintaining it by the means of mining. To put simply, PoW allows the currency’s blockchain to include a record by which those who make a certain amount of work to make the currency work (i.e. who is mining) receive a payout to their wallet and now have some coins to make payments with.
Essentially, blockchain doesn’t store information about wallet balances as it is but instead is able to extract it swiftly from the history of the transaction, stored in it. This way, the creation of new money is also stored as a transaction, literally, from nowhere, and it is sent to those who store and maintain information about all transactions by mining, as the system payment for their resources.
Advantages of POW mining
One of the advantages of PoW is the idea of emitting new coins in small parts to different parts of the ecosystem which helps to avoid inflation. PoW protocol also helps to save the network from attacks. Although those are possible, currently such attack will require a power draw of a large city to affect the normal operation of any major cryptocurrency. It also helps to confirm (or decline) transactions by a distributed consensus of several miners.
Disadvantages of POW mining
On the other hand, it is really energy-inefficient, slow, expensive to provide and unsustainable, causing lots of energy to be put into it, leading to more emissions and bigger load on the energy grid. Although, while major attacks like 51% attack, double spending or egoistic mining are extremely hard to execute, those are still possible and leave a big security flaw in the systems of several cryptocurrencies.
Top POW cryptocurrencies
Of course, there’s Bitcoin. Bitcoin is considered the first actual cryptocurrency, and it uses PoW at its basis from the beginning. As its legacy it also brings numerous forks like BitcoinCash, Private Bitcoin, Litecoin and LitecoinCash, which are somewhat popular until now, and even more forks with smaller changes to their protocols, which still seem to have a community after extreme growth just a few years ago, such as Namecoin, Dogecoin, and Primecoin.
Several new cryptocurrencies use PoW, sometimes in conjunction with other protocols, to support more modern blockchains with data storing, improved timing, on-chain computing, digital assets, smart contracts etc. Several examples of those are Dash, Monero, Zcash, Ubiq, Hush and, of course, Ethereum and its forks.
Other mining protocols
There are several other protocols that enable to partially emit new coins apart from PoW, requiring lots of computational work to be put into the system.
Proof-of-Stake (PoS) grants block creation payouts to miners who have the most coins on their wallets, and who have that number there for the longest time with some limits. Usually, those are selected randomly from the pool of the worthiest coin holders. This way only the biggest supporters are granted for the value they put into a currency and motivated to go on with mining.
Proof-of-Capacity (PoC) sends the payouts to miners who allocate more disk space for storing the blockchain on their computer and making the cryptocurrency work. Usually, this protocol is less resource-oriented than PoW but still may require lots of storage for faster or older PoC coins.
Proof-of-Authority (PoA) is a newer concept using miner’s real identity for selecting and confirming transactions. In this way, there’s no distributed consensus on which transactions should be approved, but a major network influencer’s opinion is used instead, whose reputation can be changed based on the quality of approved transactions. This protocol is not suitable for public blockchains like Bitcoin but may be great for private and corporate chains.
There are some other protocols and concepts, but currently, PoS is viewed as a major counterpart to PoW. Lots of coins transfer to PoS and lots of study is put into it to understand whether PoS is the next big thing that should happen with major cryptocurrencies in the near future. You can read the latest whitepaper on that here.