Consensus mechanism — — — Proof of work vs proof of stake

Every transaction that occurs in a blockchain network must be validated for its authenticity in other to ensure or maintain the security of the network. Proof of work and proof of stake are two major consensus mechanisms used in cryptocurrency to validate the authenticity of the transaction.

Proof of work, used in bitcoin and Ethereum 1.0 is the older among the two consensus mechanisms, while proof of stake is used in Solana, avalanche, Polkadot, polygon, and Ethereum 2.0.

Proof of work

In other to validate the authenticity of a transaction during bitcoin mining, virtual miners around the world use mining computers to solve a complex mathematical puzzle. Whichever of these miners first finds the answer or solution to this complex mathematical puzzle has the authority to add a new block of a transaction to the blockchain in exchange for a reward, This reward includes a transaction fee and block reward.

The drawback of proof of work

The first to solve the complex mathematical puzzle receives the miner’s reward as such there is massive competition among miners, every single node is running as fast as it can to be the first to solve the complex mathematical puzzle. Due to this constant competition, proof of work is not environmentally friendly as so much electricity is required.

Proof of Stake

This mechanism was adopted by some newer chains after BTC and eth. Chains using this mechanism include Solana, avalanche, Polkadot, polygon, and eth 2.0

The mechanism here is to use collateral as a Sybil resistance. Validators put up a stake in the network, assuring users that the network is efficient, trusted, and going to behave very well and if for any reason they misbehave (for instance confirming a transaction with inaccurate information) they are going to lose part of their stake and if accurate, the transaction is added to the blockchain and the validator receives the transaction reward.

Here validators are used instead of miners, this is because they are no longer mining but rather, they are only validating the network. To ensure the validity of a transaction, validators are randomly chosen in exchange for a transaction fee.

Coins staked are locked during the period of staking but can be unlocked when needed for trade. Those with a higher stake are much more likely to be randomly chosen to validate a transaction.

Pros of proof of stake

• Unlike proof of work, it doesn’t require special equipment to become a validator
• Cheaper transaction fee when compared to proof of work
• Its environmental friendly ( energy efficient)

Cons of proof of stake

• The amount of stake required to participate is high, therefore making it available for a few (the rich)

Not as proven as proof of work that involves solving

• complex mathematical puzzle
• Some proof of stake cryptocurrencies requires staking (locking up staked coins) for a particular period.

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