FOUNDATIONAL TECHNOLOGY

Proof of Work (PoW)

A blockchain consensus mechanism where validators (miners) compete to solve computationally intensive puzzles to propose new blocks and earn rewards. Bitcoin operates on Proof of Work, though energy consumption has raised institutional ESG concerns.

EXAMPLE

Banks offering bitcoin custody must address client concerns about PoW energy intensity, often by sourcing renewable energy or purchasing carbon offsets for mining operations.

Relevant Roles and Functions

On-chain Role
Chief Blockchain Infrastructure Officer
Head of Blockchain Infrastructure
Function
Blockchain Network Integrations
Node Operations
Smart Contract Infrastructure
Validator Participation
TradFi Equivalent
Core Banking Architecture
Distributed Systems
Payments Infrastructure
Technology

Related Terms

Bitcoin

The first and most widely recognized cryptocurrency, launched in 2009 as a decentralized digital currency operating on a public blockchain without central authority. Bitcoin serves as both a store of value and the foundational proof-of-concept for blockchain technology.

Example

MicroStrategy's treasury strategy of holding bitcoin on its balance sheet prompted institutional debate about whether BTC qualifies as a reserve asset under evolving accounting standards.

Validator

A node in a Proof of Stake blockchain network that is responsible for proposing and attesting to new blocks in exchange for staking rewards. Operating validators is one means by which financial institutions can earn yield and participate in network governance.

Example

A regulated bank operating Ethereum validators must implement hardware security module-protected key management to meet the OCC's guidance on digital asset safeguarding.

Blockchain

A distributed, immutable ledger that records transactions across a network of computers in cryptographically linked blocks, providing a shared and tamper-resistant source of truth across multiple parties.

Example

By settling trades on blockchain, two counterparties share an identical, real-time record without requiring a central reconciliation agent.