There is one process that is highly important in cryptocurrencies, known as mining. Mining validates transactions, or blocks, in a network. The mining process uses complex algorithms in order to prove and validate transactions and is added to the blockchain. Thereafter, the blockchain confirms transactions to the entire network.
Mining has two purposes:
● To verify whether a transaction is legitimate, which avoids double-spending.
● Create new digital currencies by rewarding miners for performing tasks.
This brings us to two important concepts in digital coins: Proof of Work (PoW) and Proof of Stake (PoS).
Proof of Work is a protocol that existed before Bitcoin, and Nakamoto applied this technique to digital currencies and innovated the way traditional transactions are set. Proof of Work is a protocol, whose main goal is to prevent cyber-attacks. Proof of Work (PoW) validates work that has happened and proves the work is correct. Bitcoin and a multitude of Alternative coins use Proof of Work to make sure the authenticity of the blockchain is correct.