Proof of Work VS Proof of Stake

Proof-of-Work

How transactions are verified in proof-of-work:

  • A new transaction is broadcasted on the blockchain network.
  • Miners compete to find the hash value that matches that of the transaction.
  • The first one to find the hash receives the reward.
  • A new “block” is created, which includes the recently concluded transaction and the address of the previous transaction.

Proof-of-stake

How transactions are verified in proof of stake

Proof-of-work vs Proof-of-stake

Resource Consumption:

  • Proof-of-work: Proof-of-work requires massive amounts of computational proof-of-worker and electricity to solve the equation. Most of the proof-of-work done is wasted as only one miner is rewarded for each block while thousands compete for it.
  • Proof-of-stake: Proof-of-stake uses tokens to validate a transaction, so it does not require a massive amount of computation proof-of-worker to validate a transaction.

51% Attack

  • Proof-of-work: If a miner or a group of miners somehow gains control over the blockchain, they’ll be able to manipulate the blocks for their advantage.
  • Proof-of-stake: In proof-of-stake, to gain control over the blockchain, the bad actor(s) would need to purchase 50% of the total amount of crypto of that blockchain in circulation, which is financially not feasible.

Centralization

  • Proof-of-work: In proof-of-work blockchains, miners who have powerful hardware stand a better chance of winning the reward resulting in people creating mining pools to combine their computing proof-of-worker to stand a better chance of winning the reward.
  • Proof-of-stake: In proof-of-stake, the algorithm randomly picks a validator, which prevents validators from forming groups. Instead, those who contribute to the network are awarded.

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