The Difference Between Proof-Of-Work and Proof-Of-Stake

Share On Facebook
share on Linkedin
Print

One of the challenges of cryptocurrencies is the consumption of a high amount of electric power. Powerful computer systems need a high amount of electrical power for mining new coins. Proof-of-work came into existence in 1993. It was created to solve the problem of spam emails. Proof-of-work was adopted by Satoshi Nakomoto (the founder of Bitcoin) as a way of validating blockchain transactions and mining fresh coins.

©

Proof-Of-Work 

Proof-of-Work is a consensus method requiring members of the network to solve random mathematics and to prove to the verifiers on the network that the mathematical problem has been solved. Through this, miners can earn tokens. It also makes the mining process very costly as the miners have to pay high energy bills. The mining process is a huge competition as it involves computers trying to solve one puzzle, but only the first person to solve the problem gets the reward. This is quite wasteful. There are also mining firms, having many computers so they can increase their chances of winning. And this is putting more strain on the consumption of power.

Puzzle pieces with word 'Evidence’

Proof-Of-Stake

Proof-of-Stake was invented as an alternative to Proof-of-work and to solve the problem of high consumption of electricity. Here, a random individual is selected to do the work, it is a consensus method of selecting at random an individual on the network to validate entries into the blockchain. In return for this service, the validator also earns a token. Those who wish to mint new coins must have some amount deposited as stake, To increase one’s chances of being selected, one must have a high amount in stake. The downside of the Proof-of-Stake is that a person on the network with a higher amount of stake has a higher probability of being selected, leaving the ones with a lesser amount of stake with little probability of being selected.

Teach yourself technical analysis: Technical Analysis

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20220816 07:15:18