What is Proof of Stake and Proof of Work in cryptocurrency?

What is Proof of Stake and Proof of Work in cryptocurrency?

Despite the fact that they are quite different, there are projects where they work simultaneously, but at different stages. We'll talk about that a bit later, but first let's understand what Proof of Work and Proof of Stake are.


What is Proof of Work

Proof of Work is a method of protecting cryptocurrency blockchain from various types of attacks.  This method provides verification of the execution of calculations by a specific miner (network node). The information PoW is looking for is the information in the solved block, where the link to the previous block in the blockchain and the number of transactions written to the block are specified. The probability that you will be selected as the node that will do the block check depends on the power of your hardware. The more power in your farm, the more likely you are to validate the block. For this reason, miners have started to join together in special pools, which are called "mining pools".

It was the Proof of Work protection method that contributed to the development and popularization of mining among the population. The complexity of block mining became more and more complicated over time, so the "masters" realized that the computing power of ordinary computers was no longer enough, and they began to develop ASICs.

The Proof of Work method had no analogues until 2011, when the Proof of Stake method appeared, after which the developers were divided. One part did not change the old method, and the other part switched to Proof of Stake.


What is Proof of Stake

Proof of Stake is an alternative to the Proof of Work method of cryptocurrency protection. The calculation of the probability of participation in the formation of new blocks, depends on the number of coins in the user's wallet. These two indicators are interconnected in such way that if you have 5% of total amount of coins in your wallet, then you will take part in checking and forming 5% of created blocks in blockchain.

Proof of Stake (PoS) protection method is first applied to Peercoin cryptocurrency algorithm. After the example that Peercoin showed, many cryptocurrencies started using it, examples are: Nextcoin, Blackcoin and others.


Where PoW and PoS are combined

Despite the competition of these two ideologies, there are projects that combine them both, getting a lot of benefits from it. PoW and PoS methods are used in Emercoin and Novacoin cryptocurrencies simultaneously. Peercoin cryptocurrency, which was the first to use the PoS method - uses it exclusively to confirm transactions, the PoW method is used for initial coin distribution, which makes Peercoin more versatile and flexible.


What other methods of protection are available

As they say, the world of cryptocurrencies is not full of only two methods. In addition to the above mentioned Proof of Work and Proof of Stake, there are others: 

  • Proof of Activity;
  • Delegate Proof of Stake;
  • Proof of Burn;
  • Proof of Capacity;
  • Proof of Storage and others.

In this article, we will not dwell on the consideration of each type of protection, for this we will provide a separate topic, where we explain the essence of each method.



The information provided in this article is just necessary for you if you want to understand cryptocurrencies, at least at the level that will allow you to analyze "white papers" of crypto projects. And yes, we forgot to remind you that this article is among the articles where we describe complex terms in simple words.