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Proof of Work vs Proof of Stake

Raghav Sawhney Hacker Noon profile picture

Raghav Sawhney

Recently you must have heard about the idea to take a move from an Ethereum consensus based on the Proof-of-Work system to one which is based on the so-called Proof of Stake.

Understanding Proof-of-Work

As the name implies, Proof of Work is the validation of the work which happened and proving that it is correct. Bitcoin and many other altcoins follow this method of consensus to ensure the good authenticity of the chain of blocks.

How Does It Work?

In order to understand how PoW works in laymen terms, consider that you are in a math exam sitting with other students in a classroom. The student who can’t just come up with the correct answer but also can reach with the complete proof of arriving at the correct answer gets the reward first.

Now, mapping it to the crypto world. ‘Math exam’ refers to the ‘transaction, ‘classroom’ to the ‘world’, ‘student’ to the ‘computing hardware’ running complex algorithms, ‘brain power’ to the ‘computing power’ and the ‘lot of energy’ to the ‘lot of electric power’.

Hope this helped you understand the PoW better!

Understanding Proof-of-Stake -

It’s an alternative approach to verify and validate the transaction or a block. It picks the Validator by the amount of stake (coins) a validator has and the varied age of the stake. In case you have 1,00,000 altcoins in a wallet, then it will have an age that is attached to it on how long you have it.

Here, the 1,00,000 Nxt coins are the stake. In case you move your coins from one wallet to the other, then the ageing gets reset. This amount acts as the security deposit, meaning that the Validator holds a major amount of stake in Nxt coin with good ageing. This way, the chances of validating a block get higher. PoS allows building a trusted and distributed network with a higher stake of coins. The Validators earns the significant part or the entire transaction fee. It’s not called mining. Rather, it’s called forging done by Validator who will process and produce a block to the chain.

Below are the challenges that PoS eliminates from PoW. They believed to have an advantage to the system.

  1. There’s no need for costly hardware
  2. It doesn’t consume high electrical power as PoW does
  3. Have more loyal Validators
  4. Validation becomes even faster


Thanks to Proof of Stake (PoS) system as validators don’t need to use their computing power because the only factor influencing their chances are the total number of their coins as well as the current complexity of the network.

This possible future switch from Proof of Work to Proof of Stake may offer the following advantages -

  • Loads of energy savings
  • A network that is more safe and secure

This indicates that in case one validator creates any ‘invalid’ block, then his security deposit will automatically be deleted. Not just that, his privilege to be part of the network consensus too will be deleted.


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