Since the recent launch of Ethereum's new network called proof of stake, there have been multiple questions on how it differentiates from the already existing proof of work mining network and how it will affect people that buy Ethereum. It has become a major concern among investors, traders, cryptocurrency enthusiasts, and those who buy Ethereum.
You will find answers to most of the frequently asked questions such as Ethereum's proof of work network and proof of stake network, the differences between them, and how this new mining network affects those who buy Ethereum. All of these and more are answered in detail in this article.
Ethereum's proof of work and proof of stake mining network are both algorithms known as consensus mediums. These consensus mediums are required to verify cryptocurrency-related transactions on a blockchain without the need for a third party. They both aid in synchronizing data and the security of blockchains, especially when you buy Ethereum.
What is Ethereum's proof of work network when buying Ethereum?
Satoshi Nakamoto, the creator of bitcoin, introduced the Proof of work idea when he first launched bitcoin to validate new blocks in the Bitcoin network. The proof of work network was the first consensus medium ever used in cryptocurrency. This network is predicated on network users' ability to demonstrate that a computing task has been completed.
On the proof of work network, computers compete to see who can solve the most complicated riddles first. The process is called "Mining." The owners of the computers are called "miners" and are rewarded with more blocks after mining. It is called mining because the energy expended and resources necessary to finish the puzzle are high and similar to the real-world process of mining metals.
This mining process consumes a lot of power, but it makes it more secure by guaranteeing that only those who can verify they have expended resources are allowed to add new transactions to the blockchain. Because of this feature, attacking a proof-of-work system is difficult, time-consuming, and costly.
Ethereum's proof of stake network
The proof of stake network is more like an upgrade to fill up the proof of work network deficiencies. It was created to reduce the processing resources needed to run the blockchain network. Various cryptocurrencies have recently adopted this network, especially Ethereum, in its Ethereum 2.0.
To authenticate transactions on the crypto network, a user has to demonstrate ownership of a specific number of cryptocurrency tokens on the blockchain. Proof of stake requires participants to put cryptocurrency up as collateral for transactions to be approved. The process is known as "Validation" the cryptocurrency owners with staked cryptos are called "validators," and they are rewarded with transaction fees.
There are more advantages related to the proof-of-stake network than the proof-of-work network. Lower energy is required or expended because validating transactions is not energy-consuming. Furthermore, you don't need cutting-edge technology to design new blocks, and proof-of-stake increases the number of nodes in the network.
What are the differences between Ethereum's proof of work and proof of stake network?
Before buying Ethereum, it is important to know the differences between Ethereum's proof of work and proof of stake network. They include:
Proof of work
- The block creators are known as miners
- High level of security but consumes more
- Energy and transaction speed is
lower. - Mining capacity is determined by
- Computational power.
- Miners are rewarded with block rewards for
- Solving a cryptographic problem.
- It is difficult to add a dangerous block,
because it - Would require equipment that is more powerful than 53% of the
network, to result in a 53% attack.
Proof of stake
- The block creators are known as validators,
- Less security, consumes less energy, is scalable, and its transaction speed is higher.
- Validating capacity is determined by the network stake.
- Validators are rewarded with transaction fees.
- Hackers will need to hold 53% of all bitcoins on the network, which is virtually unattainable, making 53% of attacks unfeasible.
Validators, unlike proof-of-work, do not require considerable amounts of processing power since they are chosen at random and are not competing. They do not need to mine blocks; instead, they must produce blocks when they are selected and validate suggested blocks when they are not. This is referred to as confirming or validating.