Crypto Made Easy | Proof of Work vs Proof of Stake

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Welcome back to our ‘Crypto Made Easy’ series, where we simplify the complex world of crypto so that you can better understand, be informed, and feel good about joining the future of tech, internet, and connectivity.

Proof of work (PoW) and proof of stake (PoS) are two completely different protocols used by cryptocurrency users for reaching consensus on which blocks to add to their blockchain’s immutable ledger. They each solve the simple obstacle of verifying transactions while remaining decentralized.

Bitcoin, for example, uses proof of work. However, a large number of networks like Ethereum, Avalanche, and Cardano, use proof of stake.

PoW achieves which blocks to add by requiring its network’s users to utilize large amounts of computational resources to calculate new valid blocks. PoS requires its network’s users to stake crypto as collateral to contribute to new blocks they want to be added on the chain.

A benefit to proof of work is that it makes bad actors spend a lot of resources to attack the network; it’s costly and difficult to penetrate. A big drawback of PoW is that it comes with a growing environmental cost.

Proof of stake virtually eliminates the massive energy consumption of proof of work. It also allows for faster transactions and more scalability. Another benefit of PoS is that users don’t need to invest more and more money and resources to perform. PoS hasn’t been proven to be as secure and stable as PoW at scale.

Proof of Stake involves competition on which new block has the most crypto staked, Proof of Work involves competition on new blocks to achieve the most computational work.

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