Difference between Proof of Stake and Proof of Work
Proof of stake (POS) and proof of work (POW) are both consensus mechanisms, but they differ in energy consumption and level of safety. POW consumes too much electric power. Proof of stake power consumption requirements is lesser than proof of work, making it a greener alternative.
Let us look at the two concepts to dig deeper into the layers of proof of work vs proof of stake debate.
Table of contents
What is Proof of Work?
Proof of work is a consensus mechanism used in cryptocurrencyCryptocurrencyCryptocurrency refers to a technology that acts as a medium for facilitating the conduct of different financial transactions which are safe and secure. It is one of the tradable digital forms of money, allowing the person to send or receive the money from the other party without any help of the third party service.read more. It authenticates a transaction without relying on a central authority. This transaction is validated on a blockchain, a type of electronic ledger that records all the transactions. Each transaction is recorded as a new block and is added to the blockchain. Following are some crucial points regarding proof of work mechanism –
- One of the most popular applications of POW is made by bitcoinBitcoinBitcoin is a digital currency that came into existence in January 2009, speculated to be created by Satoshi Nakamato, whose true identity is yet to be authenticated. It provides lower transaction fees than the traditional online payment systems, is controlled by the decentralized authority, and is not like government-issued currencies.read more. The blockchain system contains many members in its network who participate through nodes. A bitcoin node is any computer that runs a bitcoin implementation and stores the entire blockchain.
- Each transaction is authorized and validated by solving complicated mathematical problems. This process of solving complex mathematical problems is called mining.
- The miners compete with each other; the first one to solve gets rewarded. They are paid in the cryptocurrency they are approving. This mode of payment is referred to as block rewards.
- Solving these complex mathematical problems requires a powerful computer. The increase in computing power also increases the electricity consumption. So, only the most powerful computer manages to solve the math before everyone else and wins the mining contest.
- For hacking the proof of work consensus mechanism, the hacker’s computer needs to surpass 51% of the network’s computational power. To breach the POW, hackers need to spend a lot of money on the computer. For smaller networks, it is easier.
- Once a node hacks a network, it can authenticate spams and fraudulent transactions as well as mess with previous transactions.
What is Proof of Stake?
Proof of stakeProof Of StakeProof of Stake (PoS) mining is a consensus mechanism that validates blocks and transactions to secure a Cryptocurrency blockchain. In PoS, coin owners stake their coins to become a validator. Unlike the proof-of-Work (PoW) system, where users compete for their chance to append the blockchain, validators are selected at random in PoS depending on the user’s stake.read more is another consensus mechanism. In POS, instead of miners, there are validators. They are also known as forgers. Since there is no mining competition, powerful computers are not required for POS. The considerable drop in the cost and energy-saving nature on a comparative scale are some key advantages of POS. Let us look at proof of stake in more detail below –
- Instead of mining, here the validators possess certain amount of stake in the network. The validator or the node with a higher stake is chosen by the POS protocol to validate a transaction. In return, the validator gets a fee for every transaction.
- POS is considered a safer mechanism than POW as the hacker needs to own 51% of a network. Such a breach is possible but improbable. Besides, it will be very expensive to hold that much stake.
- Cardano is a popular POS blockchain platform. Ethereum has also been making news for its decision to switch to POS from POW.
- As per a report, bitcoin’s software that functions on POW required as high as 22 terawatt-hours in 2018.
POW vs POS Infographics
Proof of Work vs. Proof of Stake
| Basis | POW | POS |
|---|---|---|
| Validating nodes | Miners | Validators/Forgers |
| Energy consumption | Very high | Comparatively low |
| Consideration | Block rewards | Transaction fee |
| Hacking | Hacker would need 51% computational power | Hacker would need a 51% stake |
| Safety | Easier to hack | Harder than POW |
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