Many different technologies exists in the world of cryptocurrency. Proof of Stake (POS) and Proof of Work (POW) are two different ways to solve the puzzle for achieving a distributed consensus or synchronization of a blockchain.
Proof of work is by far the most commonly used protocol, which allows users to generate new coins by mining. Proof of stake is also quite popular, as it lets users earn an interest in keeping funds in their wallet.
The difference between Proof of Work and Proof of Stake, as well as what these differences mean, will be explained below:
Proof of Work:
In PoW, blocks represent the amount of quantifiable energy and time that was applied to produce them. There is always evidence that energy was used to put data in that state, and only a simple process is necessary to confirm it.
Bitcoin is one example of cryptocurrencies that use Proof of Work. Bitcoin miners use vast amounts of electricity, in a race to find a solution to a puzzle while validating and adding new transactions on the blockchain.
Therefore, security is dependent on distribution and amount of mining resources i.e. computer power. Forms of the computer power used include SHA-256, scrypt, Blak-256, SHA-3 etc.
Proof of Stake:
The other way of achieving consensus in a decentralized network. It uses a different form of capacity. Under this method, only those who hold some share or stake of the existing coins take part in validating transactions.
Unlike PoW that makes use of external resources (energy), internal resources in the form of stakes are a function of participating in running this network. Stakeholders validate new blocks using their share as staking power.
In essence, coin holders are responsible for safeguarding the network and coins. They take part in forging blocks in proportion to their overall percent stake. Thus, a successful hack on this network is more expensive. A hacker would have to own the majority of coins, in which case they would suffer their own coins.
Golden coin is one example of cryptocurrencies that use Proof of Stake.
Which System is Superior?
Now you know more about the Proof of Stake and Proof of Work systems, you might be wondering which is the best. As is the case with many things, that all depends on your personal wants and needs.
On one hand, the Proof of Work system is not environmentally friendly because it consumes a lot of power in the form of electricity.
There are a number of cryptocurrencies that run on a PoS system too. Since Proof of Stake uses less energy, it is seen as a greener way to run a cryptocurrency network.
