Cryptocurrency works on blockchain technology. Thus it is decentralized and uses two types of mechanisms to validate transactions on the blockchain. One is proof of works and the other is proof of stake. Some cryptocurrency use proof of works, some use proof of stakes and some use both of them for processing transactions.
In this article, we will explain to you about proof of works and proof of stakes and how they help cryptocurrencies to validate a transaction on the blockchain.
These two methods are the popular way to validate the transaction. They work in different ways but the whole purpose is to process the transaction.
The most popular cryptocurrency which uses proof of work is Bitcoin and the second most popular cryptocurrency Ethereum uses proof of stake.
What is Proof of Work (PoW)?
Proof of work is a consensus on the blockchain which decides who owns what on the decentralized network. This mechanism decides what to add to the blockchain and what not. It plays a key role to validate a transaction on the blockchain.
This is the feature that makes cryptocurrency more secure and processes peer-to-peer transactions. Before validating a transaction on blockchain proof of works provides a complex puzzle to solve. After the solution to the puzzle, a new fresh transaction is added to the blockchain, and the reward is given to the system.
As the processing of this transaction on proof of work takes more time and energy. Thus the fraud of the proof of works-based cryptocurrency is less than the proof of stacks.
Before knowing what is proof of stake we should know what is a stake and what is staking.
What is stake?
As the Ethereum blockchain use proof of stake thus the minimum coin required for the staking is called stake. There required 32ETH for staking.
What is staking?
To add new blocks on the blockchain and validate the transaction with having a stake is called staking.
What is Poof of Stacks (PoS)?
Proof of stake is another way of validating transactions and adding new blocks on the blockchain. It is the process of making blockchain secure by staking. It is different from the proof of work. In proof of stake, the transaction validation process depends on the stake of the owner.
In this mechanism, users get rewards only after staking. The user who validates the transaction is called a validator and the blocks on the blockchain are validated by more than one validator.
Proof of Works VS Proof of Stake
| Proof of Work | Proof of Stake |
| Proof of work is a process of validating transactions by solving a puzzle on the blockchain. | Proof of stake is also a process of validating transactions by staking. |
| Proof of work needs lots of processing power and electricity. | Whereas proof of stake consumes less energy and needs less processing power. |
| In this process, rewards are given to the system that validates the transaction first and called mining. | In this process, you may be a validator and collect blocks of the transaction to add to the network. And the user here participates in staking. |
| The most famous cryptocurrency that uses proof of work is Bitcoin.In proof of work the difficulty level always increases as the mining increase. | The most famous cryptocurrency that uses proof of stake is Ethereum.In proof of stake, there is no puzzle to solve. So no difficulty level. |
| In this process, the miner validates the transaction. | This validator validates the transaction. |
| Users need specific equipment. | Users need stake coins. |
Which is the best Proof of Work or Proof of Stacks
Some say the proof of work is better some say the proof of stake is better. Both have significant importance in the cryptocurrency market. There is no doubt that proof of stake reduces energy consumption and processing power. While proof of work makes the network more secure.
Although proof of stake has less impact on the environment. But there is no clarity about which one is better. Both have their demerits and advantages.
