Many have heard of proof of work and proof of stake, but don’t necessarily know the difference. Why does this matter? Because the difference is huge—it’s the difference between competing in a drag race and being elected class president.
Different blockchains use different consensus mechanisms to preserve order and keep things running smoothly. Proof of work is the original gangster of consensus, having driven the Bitcoin blockchain (and many others) since 2009. Proof of stake emerged in 2011 as an energy-friendly alternative for accomplishing the same task, and it just happens to work completely differently.
If you’re reading this guide, we’re going to assume you’re already familiar with some big-picture crypto concepts like mining and decentralized ledger technology. Proof of work and proof of stake are like two different kinds of engines that drive different blockchain systems, and by the time you finish reading this, you’ll have a clear understanding of how they compare and contrast with each other.
Proof of Work Sees Every Node Work All the Time
Miners in a proof of work system are competing against each other to solve cryptographic puzzles. These puzzles are extremely hard to solve—the more miners there are, the more difficult the math becomes—but it’s rather simple to establish when a miner has a correct answer. The rest of the network verifies that correct answer, and the miner collects a financial reward for adding a new block to the blockchain.
It’s not unlike an extremely competitive tug of war using mathematics. There is a zero-sum element to this game: only one miner gets paid, so people are incentivized to deploy supercharged number-crunching machines in order to establish a lucrative competitive advantage. Proof of work systems consume lots of electricity as a result—Bitcoin on its own uses an amount of electricity on par with some small countries.