Blockchain 101 | Proof of Work Vs Proof of Stake

Proof of Work Vs Proof of Stake

How do they work?
In Proof of work, to validate a transaction, a group of miners compete to solve a complex mathematical problem by guessing a random number. The miner who manages to guess it right, gets rewarded in the network’s native coin, for example BTC in Bitcoin’s network. The rest of the miners must also validate that his work was correct before the transaction is added to the blockchain

On the other hand, proof of stake works in a similar but slightly different way. Instead of having a group of miners competing, only one miner is selected at random. They then attempt to solve the puzzle while the rest of the miners still get to validate their work. In proof of stake, all miners must have locked some of their coins on the network as collateral. If a miner gets the solution wrong, part of their coins are taken away as punishment. If they get it right, they are rewarded.

Proof of Work
– In theory anyone can participate, but now companies have produced specialized mining computers called ASIC. They cost a jaw-dropping $10,000 (and even higher!) for just one go.
– When a new model of ASIC is released, it renders the previous one useless and ends up in the landfill.
– The process requires a lot of energy and most of it currently comes from non-renewable sources
– The process is also relatively slow because most of the energy goes to solving the puzzles instead of processing transactions.
– In contrast to PoS, blocks in PoW are smaller and can store full transaction histories.

Proof of Stake
– Anyone can connect their computer and participate in it, although It has a high threshold for minimum coins you can stake
– It requires minimal hardware and energy to participate in.
– It’s faster than proof of work.
– It applies a more centralized model which makes governance easier. However, this can also be used as a point of an attack.
– It suffers from higher inflation.
– It doesn’t rely on computer storage but rather on the cloud. This makes it quite vulnerable if ever there’s an issue.

To sum it up, neither is perfect. As much as proof of stake was brought in to solve the inefficiencies of proof of work, it still suffers from its own flaws. It all boils down to deciding which is the lesser evil that will show more resilience in future

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