Proof of Work VS Proof of Stake

Most public blockchains currently available are based on a proof-of-work system. However, in 2018, the world’s second largest cryptocurrency, Ethereum, began testing a new system that would change its blockchain from a proof of work system to a proof of state system. Before we get into exactly what that means, it is essential to understand what exactly happens when a transaction is verified.

What is Proof of Work

Bitcoin mining is done using a high-powered machine that uses two rounds of SHA256, a verification process designed to validate bitcoin transactions as they occur. This is done to ensure the security of the sanctity of the bitcoin blockchain. The speed at which the machine can mine bitcoin is measured in hashes per second.

In exchange for this service, bitcoin compensates those who do the mining by offering them a fraction of a bitcoin for each validation. This is to offset time and energy costs.

In addition, those who initiate the transaction typically provide a transaction fee to help offset the costs. The greater the processing power of the bitcoin mining machine’s computer, the more money that can be made through the process.

To be accepted into the blockchain, each block must have a valid proof of work. A working proof is a difficult and time-consuming type of data to produce. Creating a proof of work is essentially a random process with a low probability of success. This means that a bitcoin mining machine attempting to complete the process requires a significant degree of trial and error to succeed. Bitcoin uses what is known as hashcash proof of work.

Hashcash proof of work is a type of cryptographic algorithm that uses a hash function as the central element of the mining process. The hashcash function most commonly used today is haschash-Sha256. This particular proof-of-work function was created by Dr. Adam Back in the 1990s. Initially, it was used to prevent e-mail spam abuse, as hashcash generation for a single e-mail was simple. However, creating a hashcash for a large number of e-mails at the same time proved to be much more difficult.

Hashcash job proofs can be modified for the difficulty of ensuring that new blocks are not generated faster than the network can handle. This means that at this time a new block cannot be generated more than once every ten minutes. Because the probability of each successive generation is low, it is difficult to determine which bitcoin machine will generate the next block.

For a new block to be considered valid, its hash value must be less than that of the current target. This means that each block will naturally have to indicate that work has been completed to generate it. Each block also contains the hash of the previous block, which is how the chain understands where each block fits within the overall blockchain. To change a block, the work must be redone on all previous blocks, and new linked hashes must be generated for all of them. The blockchain is thus essentially protected from tampering because of the enormous computing power required.

Proof of Stake

Most major cryptocurrencies today operate with some variant of the proof-of-work model, either through the SHA256 hash or through another similar hash. However, Ethereum, bitcoin’s biggest competitor, has been working on an alternative that could significantly change the way blockchain transactions are verified.

In early 2017, Ethereum published implementation guidance for a hybrid proof-of-work/proof-of-stake system. The implementation of this new system will take place in phases before it becomes the platform’s primary verification system. Currently, the plan is for the blockchain platform to alternate between the two systems. Under the new system, about one in 100 blocks will use the new system, while the rest will continue to use the old system.

The hope is that the new system will improve the speed at which new blocks are produced. This will mark the first step in Ethereum’s evolution plans. It will be the first time that a proof-of-stake system will be used to protect a blockchain, which will be a significant step forward. This new system will serve as a proof of concept for an alternative to the proof-of-work model that dominates cryptocurrencies today and will provide backers with a chance to test their superiority. When the new proof-of-stake model is deployed on a larger scale, it will significantly reduce the amount of electricity required to verify a single blockchain.

It is important to understand how the proof of stake system differs from the proof of work model. With proof-of-stake verification, instead of having the miner solve the equation to verify the block, a validator, who is confirmed trustworthy by the stake they have in the system, undertakes to ensure its accuracy. Knowing that if they lie, they will also lose their ether.

During the first phase of deployment, all blocks verified through the new system will also be checked through the old system, to verify that the blocks contain the required information and at the same time to test the accuracy of the new system. The validators will then examine the various available chains and make a decision based on the amount of ether currently in the chain. If they make the wrong choice, they will lose their money. This process will help form a consensus that will lead to one more massive chain among the many smaller chains.

The benefits of the Proof of Stake model

Although the process of implementing the proof of stake model is not simple, this does not mean that the proof of stake system is destined to lose. It contains many obvious advantages over the more traditional process. The first obvious advantage of this new model is that it will bring down the more than $1 million that Ethereum miners spend daily on electricity to about $100,000, or only ten percent.

In addition to making cryptocurrency mining cheaper, the proof-of-stake model will also make it freer, because the speed of the user’s computer will not matter, as the calculations will be completed within the blockchain itself. In addition, this makes the 51% attack much more difficult to complete. A 51 percent attack occurs when a group of miners get together to control more than 51 percent of all nodes running a particular blockchain in an attempt to add completely fake blocks to the system that unaffected nodes will accept as accurate because the majority of nodes are already reporting them that way.

Proof of stake will also allow validators to ensure that they remain honest by forcing them to participate in the transactions they verify because they know that if they do not play fair, they will lose their own money. Finally, the proof-of-stake model allows blocks to be produced faster than ever before through a process called sharding, which involves dividing a larger database into more manageable parts. When databases are split, each chunk can have its own set of validators that complete its transactions within the shard. In this way, scalability becomes more modular and faster.

Difficulties of Proof of Stake

The new process will not be without problems. The first problem is that the new system is not guaranteed to work. This is because this type of model has never been used on a large scale. This means that there is a chance that the original blockchain will be damaged if transactions are not processed as expected or if a smart contract is misspelled. To counter this scenario, the Ethereum team is working on the so-called finality property. This property will ensure that the current state of the blockchain is secure before the new one can be implemented.


This is the end of my guide Proof of Work VS Proof of Stake! If you have read it from beginning to end, you should now have a good understanding of how each consensus mechanism works and how they differ from each other.

Proof of Work is the current mining method for Ethereum, Bitcoin, Dash and other cryptocurrencies. However, you should now be fully aware of the many problems associated with Proof of Work. These include the amount of electricity it requires, the centralization of power that mining pools have, and the threats of a 51 percent attack.

I have also listed some of the solutions that the Proof of Stake model brings to the cryptocurrency industry. However, as blockchain technology becomes more advanced, many other consensus algorithms are entering the market, all with their own pros and cons.

If you have managed to mine a good amount of cryptocurrencies, you need to make sure you store them in secure wallets. Here I explain how to choose the best wallet, Also, if you decide to trade them with other coins, choose reliable exchanges, such as KuCoin, Kraken and Binance.


Chief editor and analyst at Cripto. Exposed - Blockchain, Bitcoin, and cryptocurrency advocate in general. My mission is to encourage widespread crypto use. Too quirky?

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