Proof of Stake (PoS) vs Proof of Work (PoW)
As for a common decision on blockchain, proof of work was the original method applied by Bitcoin (the world’s first cryptocurrency). In PoW, miners, i.e. users who lend their computer’s power from graphics cards or processors, solve complex algorithms and validate blocks. The block contain a certain number of transactions within a blockchain network. When a block is full it is validated by the miners and recorded on the network.
Ideally each block of transactions should prove unique to prevent double spending or double transactions. Each block has its own 64-digit hexadecimal code that proves its uniqueness by having the Miners try to find that code. A computer uses real power to do work and solve a block from there came out and the name proof of work.
Unfortunately, block mining is not very environmentally friendly. It uses too much energy and significantly increases the cost of electricity consumed by a miner. In addition, there is so much competition now that a miner with a graphics card can compete with companies with hundreds if not thousands of graphics cards. Only the first miner who finds the code receives the reward. There are alternatives such as participating in “mining pools” but the reward is divided into dozens if not hundreds.
Proof of stake, however, solves many problems faced by the PoW mechanism. PoS is similar to PoW in that it requires users to validate transactions. PoS validators are users who lock an amount of cryptocurrency on the network. The more a user locks in and while participating in the confirmation of transactions, the more wins as a reward.
PoS is more affordable as it is easier for anyone to participate in the validation of transactions, without having to buy any expensive equipment and at the same time keeping more users connected to the network being more active and functional. The network is also becoming more decentralized and more secure. The environment suffers much less than a PoW system as it requires less energy.
More decentralization helps a network prevent a 51% attack, which is common in PoW networks, where it involves a bad actor who tries to take control of 51% of the nodes (computers that confirm transactions) by wanting to validate malicious transactions for its own benefit. Which sounds almost impossible as thousands of Ethereum wallets will have to be intercepted at once.