Blockchains must reach a consensus to secure and verify its network. 

Proof of Stake and Proof of Work are the two most recognized means of reaching consensus. 

Today, we’ll share an overview of the two:

Proof of Work 

With Proof of Work, miners compete to solve complex math equations in order to add new blocks to the blockchain. The first miner that solves the problem, proving their work, earns tokens as a reward. 

Bitcoin is the most notable proof-of-work network. During recent years, its mining equipment has evolved from at-home computer setups to large warehouse mining facilities. It’s become a big business.

However, bitcoin brings scrutiny to the proof-of-work consensus mechanism because of its intense energy use.

The consumption value is hotly debated. 

In 2021, Nic Carter asked, How much energy should a monetary system consume?

Here’s a money quote from that post,

Whether you feel Bitcoin has a valid claim on society’s resources boils down to how much value you think Bitcoin creates for society.

Proof of Stake

Proof of Stake uses validators, not miners.

A validator must deposit or stake tokens as collateral for the chance to serve as a network validator. The age and size of the stake may increase a validator’s chances of being selected. 

Validators store data, process transactions, and add new blocks to the blockchain in order to earn rewards and help grow the network. On the flip side, validators may lose their stake if they approve invalid transactions or go offline. 

With proof-of-stake, supercomputing hardware is not required. Anyone can become a validator with an internet connection. 

Because supercomputers are not necessary, proof-of-stake consumes less energy than proof-of-work. However, it has yet to achieve scale. 

To Summarize

Proof-of-Work can sustain a trillion dollar network (bitcoin), but constantly consumes energy. 

Proof-of-Stake requires less energy, but has yet to prove itself at scale. 

Links for Further Learning

If you are interested in learning more about Proof-of-Stake and Proof-of-Work, here are a bunch of hand-picked links for your perusal.

Bitcoin, Proof-of-Work — Khan Academy (May 2013)

Cryptoeconomics and Proof-of-Stake — Blockchain @ Berkeley (October 2017)

Visual Capitalist breaks down the power consumption of bitcoin mining. (April 2021)

Blockchain Basics & Consensus — A Gary Gensler Lecture (MIT Fall 2018) 

Vitalik Buterin and Lex Fridman talk Proof-of-Stake vs Proof-of-Work. (June 2021)

Ethereum’s Proof-of-Stake Upgrade Explained (November 2021)