Proof of Work vs Proof of Stake

PoW vs. PoS: Which one is better?

The Proof of Work and Proof of Stake consensus algorithms were two of the earliest blockchain-based consensus mechanisms on the market. Both have a lot in common, but they also have some major differences. In this article, we’ll go over why Proof of Work always wins out over Proof of Stake and what each protocol offers.

Proof of work

Proof of work has been around the longest and might just be the most well-known Bitcoin consensus protocol. In simple terms, this system relies on users (miners) who solve mathematical puzzles to validate transactions and secure the network. Every 10 minutes or so a new group of transactions is added to the blockchain (or ledger). This block is then sent to all network nodes for validation. Then, nodes will try and solve a complex math problem (or algorithm). The first node that does this gets a reward for their work, which is generally paid in Bitcoin.

The great thing about proof-of-work is that “everyone” doesn’t need to do it.

This means that someone can dedicate their time, resources, and computer(s) to the network and receive a reward for it. It's a sort of self-funding mechanism. Users who participate in the mining process also contribute to the overall security of the blockchain. They do this by making sure no one else can “cheat” or make alterations to a block without getting caught immediately.

Proof of stake

Proof of stake (PoS) is similar in that it rewards users who validate transactions on the network. The difference here comes down to how participants are rewarded (or penalized). With PoS, validators don’t have to do any physical work like with proof-of-work.

Proof of stake is a system that removes the need for mining in the “stakeholders”. They “stake” some of their cryptocurrency, and they are considered miners.

There is no block generation/creation or reward for solving blocks without miners. The task becomes completely reliant on a protocol.

This system also introduces the idea of too many tokens to mine (they become too scarce). Unlike Bitcoin, which needs valuable hardware to mine coins, Ethereum needs expensive solar panels and access to free electricity supply to create blocks.

It lowers the necessity of a decentralized consensus as every potential miner has a say. It makes sure that miners cannot unscrupulously make decisions that exclude stakeholders which leaves many users unprotected against censorship and unfair deal-making by exchanges or token

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