0.2 PoW vs PoS


Proof of Work (PoW) and Proof of Stake (PoS) are consensus protocols. This means they are different methods to validate transactions on a blockchain. Currently, Ethereum uses Proof of Work which requires miners to validate the transaction in the network. With Ethereum 2.0, there will be a switch to Proof of Stake, which instead utilizes nodes within the network for validation.

Learning Objectives

  • Understand the differences between Proof of Work and Proof of Stake.

  • Read about what mining is and its disadvantages.

Reading List

Key Points

  • Proof of Work

    • Uses miners to validate transactions and create new coins

    • Relies on miners devoting large amounts of computing power to solve cryptographic puzzles to verify new blocks of transactions

  • Proof of Stake

    • Proof of Stake is the consensus mechanism that many members of the blockchain community want to move to. It will reduce electricity usage and gas fees, and it will increase decentralization of the network.

    • Implementing Proof of Stake will require a certain number of nodes in the network, which means a certain number of individuals willing to stake their Ether.

Review Questions

  • What is the difference between Proof of Stake and Proof of Work?

  • Why do consensus algorithms exist?

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