Cryptocurrency is a virtual currency which is backed by blockchain technology which uses a trustless and distributed consensus system through which a user is able to send and/or receive money from someone without using the third party services.
Purpose behind the idea of the digital currency is to ensure fully secure transaction without any mediation. A distributed network of ledgers is created that work in tandem to ensure all transactions, contracts and accounts are public.
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Data is stored in blocks which are strung together in chains, hence, the name, blockchains. All incoming fresh data is organized into a new block. After a block is filled with data it is chained sequentially after the previous block. All data is thus chained in a chronological order.
Requirement of Proof of Work
Blockchain technology demands a proof of work for creating a vast computer calculation which is also known as mining. It must be carried for creating a fresh group of trustless transactions, the block, on the distributed ledger.
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All miners in the network start competing to find a solution for the mathematical problem linked with the candidate block. The problem can typically be solved only through the brute force which calls for a large number of attempts. On finding the right solution to the problem, the miner announces his solution to the entire network at the same time. He receives a cryptocurrency prize, a reward for his efforts.