What is Proof of Work and Proof of Stake?

  • 06 Ekim 2021 Çarşamba
  • 0 INTERPRETATION, 537 READ
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What is Proof of Work and Proof of Stake?

Satoshi Nakamoto aimed to create a mechanism by which transactions could be approved without a party before launching Bitcoin. Satoshi projected it could happen through a consensus mechanism, maintaining his work by this purpose. He revealed the Proof of Work mechanism. With the emerging of this mechanism based on cryptography, cryptocurrency came into existence. Thus, transactions would be carried out without the need for a third party. Therefore, the Proof of Work mechanism has gained an important place in the crypto ecosystem as a system that is the basis of many cryptocurrencies and the first consensus system. But it requires the submission of proof of work. This proof of work in the crypto ecosystem is carried out by mining.


Miners create new blocks by decoding passwords formed by advanced mathematics based on blockchain cryptography and receiving rewards from the blocks they make. Through it, the supply of coins to the market and various transactions are possible. However, the problem is the energy consumption required by the miners to solve these passwords and these codes. As the difficulty level increased day by day, more powerful devices began to be needed to decrypt these passwords and create new blocks, and energy consumption increased significantly. For example, there are reports that the energy cost spent on Bitcoin mining is 16% more than the annual energy consumption of Ireland. A new consensus mechanism was obliged, concerning such an enormous energy consumption and costs, harming nature. And this new mechanism's name is Proof of Stake.

The Proof of Stake mechanism was introduced in 2012 by Scott Nadal and Sunny King. This model, presented as a solution to eliminate problems such as energy consumption and costs, has made fundamental changes to the mining system. The Proof of Stake mechanism has a more complex infrastructure than the POW, but its basic principle is to create new blocks by locking a certain amount of crypto into the network. In this mechanism, coins are locked into the blockchain network, and shareholders, who lock them, receive mining rewards. Thanks to the system, expensive mining equipment and high energy consumption are not required anymore. The Proof of Stake system has been preferred by most cryptocurrency projects coming out in 2017 and beyond. In addition, the transition of Ethereum to the PoS system with the 2.0 upgrade has greatly increased interest and confidence in this new consensus mechanism. Avalanche, which currently uses Proof of Stake, had implemented PoS technology before Ethereum.

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