Before starting with today’s topic (proof of stake vs proof of work), let’s know what actually cryptocurrency is and why everyone is talking and investing in it these days. Well, in order to get information about cryptocurrency you are supposed to read the full article.
Decentralized digital money based on blockchain technology is said to be cryptocurrency. Many people are familiar with Bitcoin and Ethereum, but to your knowledge, there are more than 19,000 cryptocurrencies in the world. There are no central authorities that maintain or manage the value of cryptocurrency. Instead, the tasks are distributed among the crypto users via internet. Purchasing cryptocurrency can get quite risky, so before making a decision of purchasing a cryptocurrency one should always acquire knowledge about how things work in that system.
For the prevention of fraud, the transaction is checked with the help of a validation technique, known as proof of stake and proof of work. Moreover, these are the terms used for the validation and verification of transactions before adding them to a blockchain. After that, in form of cryptocurrency, an award is given to the verifiers for their efforts and hard work.
Proof of work
Proof of work is known to be the census mechanism that was first used by Bitcoin. Due to having a huge amount of processing power, it tends to be called proof of work. And to solve the Math puzzle, the proof of work blockchain is verified and secured by miners. As now the winner updates the blockchain with the latest verified transaction and then as mentioned above, is rewarded with the predetermined crypto by the network. In proof of work, the blockchain is mineable. It is said that in proof of work mining machines are used to mine the blockchain coin.
More importantly, proof of work tends to have a huge amount of advantage over other cryptocurrencies like Bitcoin. When the value of the cryptocurrency rises, it results in an increased number of people investing and purchasing it, more miners start taking part in the crypto buying procedures, hence resulting increase in their security and power. One of the reasons why it is not possible for other companies or individuals to meddle in cryptocurrency’s blockchain is because of the large amount of processing power involved in the cryptocurrency blockchain. On the flip side, proof of stake is used which is referred to be known as an alternative to proof of work.
Proof of stake
Blockchain cannot be mined using ASIC miners. So, in short, this blockchain is not minable. In a deterministic way, the creator of a new block is chosen, depending on its wealth (how many coins they have), also known or defined as stake. In short, rewarding the most invested participants. In proof of stake, the miners take the transaction fee as there is no block reward. As compared to the proof of work currencies, the proof of stake currencies is the one that proves to be several thousand times more cost and energy effective).
Pros of PoW
1. Proof of work is secured.
2. Proof of work is decentralized.
3. Proof of work is rewarding.
Cons of PoW
1. PoW is super expensive.
2. PoW speed is also slow as compared to PoS.
3. More technical than PoS.
Pros of PoS
1. The transaction is done super-fast as compared to PoW.
2. The energy consumption is small.
3. The transaction fee is low as compared to the transaction fees of PoW.
Cons of PoS
1. When it comes to security. Proof of stake tends to have less security.
To cut a long story short, proof of stake and proof of work cannot work without the use of central authority. Proof of work creates consensus by compelling participants to expend computational effort and power, and electricity, to construct a new valid block. Proof of stake, on the other hand, establishes consensus by adding members to put their crypto behind a new block they want to be added to the blockchain of a cryptocurrency.
Another term is created to validate the transactions called validation mechanism – proof of space. Proof of stake and proof of work is still questionable when it comes to security against the threat. To solve some of the centralization issues that affect the proof of work and proof of stake, the proof of space consensus mechanism is used.