🔑Crypto and blockchain: Proof of Work vs Proof of Stake 👁‍🗨

Essentially, Proof of Work is used to determine how the blockchain reaches consensus. In other words, how can the network be sure that the transaction is valid and that someone isn’t trying to do bad things, such as spend the same funds twice?

Proof of Work is based on an advanced form of mathematics called ‘cryptography’. This is why digital coins like Bitcoin and Ethereum and called ‘cryptocurrencies’!

Cryptography uses mathematical equations that are so difficult that only powerful computers can solve them. No equation is ever the same, meaning that once it is solved, the network knows that the transaction is authentic.

Lots of other blockchains copied the original Bitcoin code and as such, also use the Proof of Work model. Although Proof of Work is an amazing invention, it is anything but perfect. Not only does it need significant amounts of electricity, but it is also very limited in the number of transactions it can process at the same time.

As a result, other consensus mechanisms have been created, with one of the most popular being the Proof of Stake model. Proof of Stake was first created in 2012 by two developers called Scott Nadal and Sunny King. At the time of its launch, the founders argued that Bitcoin and its Proof of Work model required the equivalent of $150,000 in daily electricity costs.

The benefits of proof of stake include a fairer and more equal mining system, more scalable transactions, and less reliance on electricity.

As a result, the world’s second most popular cryptocurrency – Ethereum, is in the process of attempting to move from Proof of Work to Proof of Stake. The Ethereum Proof of Stake date is yet to be confirmed, however, the team is working hard to get there as quickly as possible.