A consensus mechanism is a fault-tolerant mechanism that is used in computer and blockchain systems to achieve the necessary agreement on a single data value or a single state of the network among distributed processes or multi-agent systems, such as with cryptocurrencies. It is useful in record-keeping, among other things.
Proof of Work
PoW involves miners delegating computer power to solving mathematical puzzles. It’s the mechanism that supports Bitcoin and is considered by some to be more secure than PoS because of how much energy it consumes.
- Proof of work (PoW) is a decentralized consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system.
- Proof of work is used widely in cryptocurrency mining, for validating transactions and mining new tokens.
- Due to proof of work, Bitcoin and other cryptocurrency transactions can be processed peer-to-peer in a secure manner without the need for a trusted third party.
- Proof of work at scale requires huge amounts of energy, which only increases as more miners join the network.
- Proof of Stake (POS) was one of several novel consensus mechanisms created as an alternative to proof of work.
Proof of Stake
PoS involves holders “staking” (putting up) their crypto to secure that network’s transactions, incentivizing stakers with crypto dividends. It aspires to be faster, less energy intensive, and more scalable than PoW-based protocols. Ethereum is planning to move towards PoS in the coming year.
- With Proof-of-stake (POS), cryptocurrency owners validate block transactions based on the number of coins a validator stakes.
- Proof-of-stake (POS) was created as an alternative to Proof-of-work (POW), the original consensus mechanism used to validate a blockchain and add new blocks.
- Proof-of-stake (POS) is seen as less risky in terms of the potential for an attack on the network, as it structures compensation in a way that makes an attack less advantageous.