Difference between Proof of Work (PoW) and Proof of Stake (PoS) in blockchain
Last Updated :
11 May, 2022
1. What is Proof of Work (PoW) ?
The term “proof of work” was coined by Markus Jakobsson and Ari Juels during a document published in 1999.It is related to bitcoin. Proof of Work (PoW) may be a protocol designed to form digital transactions secure without having to believe a 3rd party. This work builds on previous puzzle solutions. PoW may be a way of verifying current and past transactions. The work that goes into solving puzzle generates rewards for whoever solves it called it as mining. In other words, this is often an algorithm that’s designed to verify transactions and obtain new blocks added to blockchain. With Proof of Work, miners are competing to be primary to finish a complex mathematical puzzle which will generate this new block, meaning that they’ll be ready to collect some new Bitcoins as a rewards.
- PoW reduces risk of a 51% attack because it’s very hard to do work.
- No miner will be able to control bitcoin network single handedly Based on Hashcash PoW system.
- The miners need to give a proof that they have done some work, before proposing a new block.
- At the same time, each solution is easy for community to verify. This makes it easy to check all transactions for trustworthiness.
- PoW also sets a limit on how many new blocks of data can be generated. For example, miners can only create a Bitcoin (BTC) block every 10 minutes.
- It doesn’t rely on a single third party transactor. This builds a “trustless” and transparent network.
- Monopoly can increase over time.
2. What is Proof of Stake (PoS) ?
Proof-of-stake is a consensus algorithm that decides on who validate next block, according to how many coins you hold, instead of miners cracking cryptographic puzzles using computing power to verify transactions like they do with traditional Proof-of-Work.
- The probability of validating a new block is determined by how large a stake of a person.
- The validator do not receive a block reward, instead they collect network fees as their reward.
- Peercoin was first cryptocurrency to implement a full-scale PoS consensus model.
- Handling Monopoly and Power Consumption.
Difference between Proof of Work (PoW) and Proof of Stake (PoS) in blockchain :
| S.No. |
Proof of Work (PoW) |
Proof of Stake (PoS) |
| 1. |
The probability of mining a block is determined by how much computational work is done by miner. |
The probability of validating a new block is determined by how large of a stake a person holds (how many coins they possess). |
| 2. |
A reward is given to first miner to solve cryptographic puzzle of each block. |
The validator donot receive a block reward instead they collect network fee as their reward. |
| 3. |
To add each block to chain, miners must compete to solve difficult puzzles using their computer process power |
There is no competition as block creator is .chosen by an algorithm based on user stake. |
| 4. |
Hackers would need to have 51% of computation power to add malicious block. |
Hackers would need to own 51% of all cryptocurrency on network, which is practically impossible. |
| 5. |
Proof of work systems are less energy efficient and are less costly but more proven. |
Proof of Stake systems are much more cost and energy efficient than POW systems but less proven. |
| 6. |
Specialized equipment to optimize processing power. |
Standard server grade unit is more than enough. |
| 7. |
Initial investment to buy hardware. |
Initial investment to buy stake and build reputation. |
| 8. |
Bitcoin is most well known crypto with a Proof-of-Work consensus building algorithm which uses most well known proof-of-work function is called SHA256. |
Some of cryptocurrencies that use different variants of proof-of-stake consensus are: EOS (EOS), Tezos (XTZ), Cardano (ADA), Cosmos (ATOM), Lisk (LSK). |
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