As cryptocurrencies continue to evolve, two key consensus mechanisms have emerged for validating transactions on the blockchain: proof-of-work (PoW) and proof-of-stake (PoS). This explainer will examine how these protocols differ and the unique benefits and drawbacks of each.
Consensus Mechanisms in Cryptocurrency
Proof-of-work (PoW), first introduced by Bitcoin in 2009, requires miners to compete to add new blocks to the blockchain. By expending significant computational power, miners prove that the work was done to validate transactions.
The first miner to win the race and discover a block is rewarded with newly minted cryptocurrency. PoW relies on decentralized consensus – no single entity controls the network. However, its critics consider it incredibly energy-intensive.
Proof of stake, first conceptualized in a bitcointalk.org thread in 2011, works differently than PoW. Rather than miners, PoS networks have “validators” who stake or lock up their coins to participate in tran
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