Proof of work or proof of stake, which is a better basis for cryptocurrency mining? What are the main signs of distinction between proof of work and proof of stake? Would changing to a proof of stake idea would be more beneficial to the miner community? This article will explain the differences between them both and also the benefits that each can provide.
Proof of Work
Firstly, I would like to start by explaining what is Proof of Work and how it operates. The main function of proof of work was to deter cyber attacks which have the goal of exhausting computing resources.
Some would believe that since bitcoin mining operates by the proof of work principle that their creation would be somehow linked, but that is wrong. The proof of work concept had existed sometime before bitcoin was created and the proof of work concept was just applied to how users would mine for bitcoin.
Originally the proof of work concept was published back in 1993 by Cynthia Dwork and Moni Naor.
Proof of work might have been the idea behind creating bitcoin because it allows trustless and distributed consensus.
Trustless and Distributed Consensus
Trustless and distributed consensus allow you to send or receive money from someone who you do not trust. When you are using regular payment methods such as Visa, Mastercard, or PayPal, you need to trust the person you are doing transactions with and you need to trust the service which is making the transaction possible. These 3rd party services keep their private ledgers, but with bitcoin, for example, everyone involved in the transaction has a copy of the leger and it is completely transparent to everyone. That means that anyone can verify the transaction.
Proof of Stake
Proof of stake differs from proof of work by using different means of validating the transactions to attain the distributed consensus. The purpose is still the same as proof of work, but the process of how the goal is reached is different.
The proof of work principle algorithm rewards its miners who solve mathematical problems to validate transactions and create new blocks in the blockchain whereas with proof of stake the creator of the block is chosen by a deterministic system, which looks at how wealthy the creator is.
Proof of stake does not award miners when they make new blocks whereas proof of work does.
Digital currencies are predetermined in the beginning and they never change.
Because new blocks are not created when using the proof of stake principle, miners are instead referred to as forgers.
Conclusion of the Battle
The proof of stake concept removes the power race competition between its miners because those factors do not influence their chances and as stated before the factors which matter in the proof of stake concept are the number of coins the user already has and how complex the currently given algorithms.
Huge benefits from this would be the reduced power consumption that is made by running proof of work mining farms, a way safer network, and miners not influencing the global GPU market.
The most notorious cryptocurrency that is planning to make the switch to the proof of stake concept is Ethereum.
