Proof Of Work (POW) Vs Proof Of Stake (POS)

Proof of work and proof of stake are two terms regularly thrown around in the cryptocurrency space. If you just got started with bitcoin or other cryptocurrencies (altcoins), you definitely need to understand at least the basic differences between these terms.

This will not only help you to interact more confidently in crypto forums but also to enlighten friends, relatives and those who’ll be following you on various media channels.

Before we jump right to the differences though, it’s worth mentioning that POW and POS are the most common forms of distributed consensus models in the blockchain technology. ( distributed consensus simply refers to the way a given set of people are made to agree on a subject — in our context, the subject is validating transactions).

The main objective of each of these consensus models is to prevent spam and fraudulent activities on their respective networks.

Proof of work is a computer algorithm that requires miners to solve very tough mathematical problems before adding a block to the blockchain. The process is extremely costly because it requires a lot of hardware resources, processing power, and electrical energy.

The proof of work function of Bitcoin, for example, is called Hashcash (SHA-256). This function produces specific data which is later used to justify the fact that miners have done a great deal of work (solving cryptographic puzzles). Hence the name proof of work.

What is proof of stake?

Unlike like Proof of work, blocks are not mined, they’re forged. In other words, the blocks are pre-mined and made available for staking. This means that in any proof of stake based consensus, the total supply of cryptocurrencies is fixed from the beginning.

Take note that you’ll still hear people talk about mining in POS — don’t get confused. They do so because mining typically involves two processes: 1) Verifying transactions and 2) adding coins to the network. But because coins are pre-mined in POS, Experts prefer to go with the words forging, minting etc — NOT mining.

The idea of proof of stake was put forward as a remedy to counter the huge expenses incurred in the proof of work consensus. In fact, studies have shown that the electrical cost of maintaining Proof of work networks is equivalent or more than the cost required to power millions of homes.

The number of digital tokens you have in the POS consensus determines your likelihood of being selected to forge and add blocks to the blockchain. So the greater the number of tokens you have, the greater your chances of being selected for staking. Why? Because the consensus assumes that the greater the amount of stake a user has, the more likely is s/he to do his/her best in the network.

These are just the basic differences between the two consensuses (proof of work and proof of stake) But at least, you now have a basic understanding of how they differ.


Cryptocurrency enthusiast and writer

Leave a Reply

Close Menu