Proof of Work (PoW)
A consensus mechanism where miners compete to solve computationally difficult cryptographic puzzles (finding a hash below a target difficulty) to validate transactions and create new blocks. The first miner to find a valid solution broadcasts it to the network and earns the block reward. PoW's security comes from the immense cost of computation — attacking the network requires controlling 51%+ of the total hash rate, which is prohibitively expensive for major chains.
“Bitcoin uses Proof of Work, requiring miners to collectively spend billions of dollars annually on specialized ASIC hardware and electricity to secure the network and earn ~450 BTC per day in block rewards.”
Mining
The process of using computational power to validate transactions and add new blocks to a Proof of Work blockchain. Miners compete to solve a cryptographic puzzle (finding a hash below a target difficulty), and the first to succeed earns the block reward plus transaction fees. Mining secures the network by making it prohibitively expensive to attack.
Hash Rate
The total combined computational power being used to mine and process transactions on a Proof of Work blockchain, measured in hashes per second. A higher hash rate means greater network security because it becomes more expensive for an attacker to gain majority control. Hash rate is a key indicator of mining activity and network health.
Consensus Mechanism
The method by which a decentralized blockchain network reaches agreement on the current state of the ledger and which transactions are valid. Consensus mechanisms solve the problem of coordinating untrusting parties without a central authority. Major types include Proof of Work, Proof of Stake, Delegated Proof of Stake, and Proof of Authority.
Proof of Stake (PoS)
A consensus mechanism where validators are selected to propose and attest to new blocks based on the amount of cryptocurrency they have staked as collateral. PoS replaces energy-intensive computational competition (PoW) with economic stake as the security mechanism — validators risk losing their staked tokens (slashing) if they act maliciously. PoS is significantly more energy-efficient than PoW and is used by Ethereum, Solana, Cardano, and most modern blockchains.
Block Reward
The cryptocurrency awarded to a miner or validator for successfully creating a new block on the blockchain. Block rewards consist of newly minted coins (block subsidy) plus the transaction fees from all transactions included in the block. In Bitcoin, the block subsidy halves approximately every four years.