Proof of Stake vs Proof of Work: Energy Usage, Security, and More
Cryptocurrencies, particularly well-known names like Bitcoin and Ethereum, have been under intense scrutiny as of late due to environmental concerns.
Many of these concerns are tied to “proof of work,” the consensus method used to secure most transactions, particularly on larger chains. The Ethereum Blockchain could be shedding proof of work very soon, however, adopting “proof of stake” consensus instead — and reducing electricity consumption in the process. Other blockchains, including Terra, have already embraced proof of stake.
But energy consumption isn’t the only — or even the most important — difference between proof-of-work and proof-of-stake blockchains. The switch could also result in wider participation in mining, and perhaps most crucially, a more secure blockchain.
What is proof of work?
Put simply, proof of work helps complete and secure cryptocurrency transactions. In order to prevent attacks and secure transactions, blockchains use consensus mechanisms.
With proof of work consensus, miners must solve incredibly challenging mathematics equations in order to verify a block of transactions. But it’s not enough just to solve the equation. Miners must be the first to complete the equation. Otherwise, they won’t get any reward for their work.
Completing these equations isn’t something that can be done by even the most mathematically adept humans. So instead, miners use powerful computers to solve these problems — computers that require huge amounts of electricity. And, because rewards are based on how fast the equations can be completed, miners are constantly competing to be the fastest, requiring even more electricity.
Why use proof of work?
In the case of most major blockchains, including Bitcoin and to this point, Ethereum, proof of work is the preferred consensus method.
That’s because it offers several powerful features for fledgling blockchains. Proof of work provides a reliable and robust method to secure transactions and promote decentralization. As more miners join the network, security grows, making it harder for bad actors to execute attacks.
These advantages often outweigh concerns about electricity and the need for ever-more expensive computers.
What is proof of stake?
The goal of both proof of work and proof of stake consensus is the same: verify and securely complete blockchain transactions. In contrast to proof of work, however, it doesn’t require large mining rigs, powerful computers, or massive electricity usage.
Instead, miners must stake a significant amount of tokens in order to verify transactions. These staked tokens are locked, meaning they are unable to be spent by validators and are instead used to secure transactions.
And, because rewards are based on tokens staked rather than computing power, validators don’t need fancy hardware. That means less electricity and a more environmentally-friendly blockchain.
Not just electricity
Believe it or not, proof of stake isn’t all about saving electricity. That’s just a happy accident and an additional benefit of proof of stake’s design.
The main benefits of proof of stake consensus include increased decentralization and improved security. Because expensive, energy-intensive hardware rigs are not necessary to validate transactions, more people can participate in mining. This increases decentralization and improves security, especially against so-called “51% attacks.”
Those security and decentralization improvements are why Ethereum is shifting to a proof of stake consensus model. And, it’s why certain blockchains, including Terra, have already embraced proof of stake.
So remember, proof-of-stake isn’t just about electricity usage — it’s about building a better blockchain and consensus mechanism. But as global warming and energy usage continue to become bigger concerns, it’s nice to know that these changes could make cryptocurrency a more environmentally friendly endeavor.
Learn more
You can learn more about proof of stake and proof of work consensus via ethereum.org’s post on the subject, or discover how and why Angel Protocol became a validator on the proof-of-stake Terra blockchain here.
Written by Brendan Murray for Angel Protocol
