The two most-used consensus mechanisms in blockchains are Proof of Stake and Proof of Work. These two ensure safe and valid transactions by incentivising the validators involved in mining the tokens.
To know the difference between the two mechanisms as well as their pros and cons, check out the data below:
Proof of Stake vs Proof of Work: What’s the difference?
Proof of Stake (PoS) and Proof of Work (PoW) are similar in that they’re both used by a network of participants to agree on which new block of transactions would be added to the blockchain. However, what makes these two mechanisms different is how they reach their endpoint.
The transaction verification in PoW is done through mining. The participants here agree on which blocks to add by competing against each other and using large amounts of energy and computational resources in generating a new valid block to add to the chain. Whoever is the first to solve a mathematical problem, becomes the validator.
Meanwhile, PoS requires the network participants to stake their cryptocurrency as collateral for a chance to be chosen as a validator for the next block in the chain.
The pros and cons of PoS and PoW: Which is better?
There is no perfect consensus mechanism, both have their pros and cons. As a user, it is up to you to decide which mechanisms have the set of pros that outweigh the cons. To help you decide, here’s a list of the advantages and disadvantages of PoS and PoW:
At a glance, here are the best factors of PoS and PoW:
|Proof of Work||Proof of Stake|
|Transition to renewables||Increased throughput|
|Trapped energy||Censorship resistance|
|Security||Lower barrier to entry|
PoW pros explained
- Healthy competition and transition to renewables
By design, PoW incentivises speed and efficiency which creates a competitive environment for miners. That’s why mining companies are constantly looking for faster and more efficient mining chips.
This competition between crypto mining companies doesn’t just make crypto mining more efficient, it also encourages companies to create a breakthrough that would lessen the energy consumption required to create another block.
- Trapped energy
Since crypto mining uses a lot of energy, some communities can profit from their trapped energy by supporting the crypto mining companies and earning compensation for their energy.
An example of this is the Yunnan and Sichuan provinces in China. Both provinces have intense rainy seasons, which produce excessive amounts of renewable hydroelectric power.
The crypto mining industry saw this as an opportunity and established its plants in the provinces to harness the surplus energy and give the provinces a tradeable value.
Proof of Work is proven to be the most efficient way to maintain consensus and security within distributed public networks since it requires a larger initial cost on the expenditure of resources and hardware compared to the single upfront expense used to participate in Proof of Stake.
PoS pros explained
Proof of Stake has more energy-efficient operations compared to Proof of Work. You don’t have to spend money on special equipment since the hardware requirements used here are equivalent to your average laptop in today’s market. The validator system is also not demanding in the Proof of Stake systems.
- Increased throughput
Since Proof of Stake chooses the next validator to write the next block on the chain based on the tokens they have staked instead of having miners compete in solving a complex maths problem, Proof of Stake is significantly quicker than Proof of Work when it comes to processing transactions.
- Low barrier to enter
You don’t need to have a huge investment in hardware and energy to participate in Proof of Stake networks. The only thing you need are the tokens for collateral and the necessary hardware to be chosen as the validator of the next block in the chain.
Just as there are pros in PoW and PoS, there are also cons that would challenge the advantage of these two consensus mechanisms. Check it out below:
|Proof of Work||Proof of Stake|
|Energy consumption||Unproven at large scale|
|Traceability||Less robust security|
PoW cons explained
- Energy consumption
Proof of Work uses an immense amount of energy. For context, the power required to mine Bitcoin is more than what an entire nation like Ukraine and Norway would use. The only rebuttal is that some of the crypto mining companies are now leaning towards renewable energy in their operations.
PoW miners work at full power at all times of the day. This significantly lowers the lifespan of the equipment. Additionally, since new chips are being developed constantly, the old chips tend to get phased out faster and become e-waste.
Crypto mining facilities are easy to spot and thereby, easier for anti-crypto regimes to crackdown. This is the case in China where multiple crypto mining companies are kicked out of the country due to government-enforced regulations.
PoS cons explained
- Unproven at large scale
PoS is yet to scale to the size of Ethereum and Bitcoin. For this reason, it is not yet as secure and decentralised as PoW.
- Coin consolidation
PoS uses stakes to determine who will write the next block and receive the incentive. The higher your stake is the higher your chance of being chosen as the validator. This means that only those with a deep pocket can truly benefit from PoS.
- Less robust security
The ease with which you can enter the PoS network decreases the security of this consensus mechanism. In PoW, an attack on the network is less plausible since it is protected by a two-fold security system of the energy cost and the initial cost of the hardware equipment. PoS only has the initial upfront cost to participate, which makes it more vulnerable to attacks online.
When it comes to which mechanism is better than the other, no one can truly say. It all depends on what you value. If you are looking for a mechanism that uses less energy and less amount for entry, Proof of Stake would be best for you. However, if you want a consensus mechanism that is safe, Proof of Work can provide you with the security you are looking for.