If you are involved in the cryptocurrency space, you probably have hear of the two most important ones: Bitcoin & Ethereum. Both are incredible and fits a specific market, responding to different needs, and operates on different mining algorithm. In this article, we are going to explain the main differences between PoW & PoS.
What is Proof-of-Work ?
You already know what PoW is, actually it is really easy to understand the concept. For exemple, the Pyramids in Egypt are proof-of-work. They represent the work of thousands of people, for hundred of years and you have no way to build them without putting the work. In Bitcoin, PoW is refferenced as the mining protocol. Basically this is what make the Bitcoin network so secure, because if an attacker wants to double-spend his bitcoin, he will have to rewrite the blockchain. And to rewrite the Bitcoin’s blockchain you have to re-mine all the blocks, in doing so, you will spend a lot of energy (electricity). It is computationally impossible to rewrite the Bitcoin’s blockchain more than a 100 blocks, even if all the countries in the world use their computer power together to attack the network, because PoW makes it technically impossible and economically unviable.
What is Proof-of-Stake ?
PoS is also a system for validating transactions, so the purpose is the same as the PoW, but the result is obtained in a different way. Proof-of-Stake is simply people who lock up their coins for a predefined amount of time, insurring they actually have something to loose if they act maliciously. Their coins are at Stake, and if they don’t follow the consensus rules of the Ethereum blockchain, they will loose their coins.
PoW & PoS are two different mechanism by which we obtain security in the network. But obviously, PoW is way more efficient because it is backed by electricity and performing a 51% attack on the network is extremely hard.
The world can afford only 1 proof-of-work system — Andreas Antonopoulos
There are also other algorithm used in other cryptocurrencies, so you have to clearly understand the mining algorithm to start mining and be profitable.