Proof of Work vs Proof of Stake

 

There is a lot of talk about Proof of Stake and Proof of Work (what we have now)

So what is it all about?

Proof of Work

Proof of work is simply that transactions are verified by calculations by miners (like me) that take a reward for the transaction and that reward is in the production of new coinage. I’ve linked to the Wikipedia articles because I’m talking in terms of Bitcoins. So to verify transactions we have to perform complex mathematical calculations. For this we use things like ASIC chips. Specific chips designed to calculate the hash codes to process the transactions.

Proof of Stake

Normally with proof of stake the coins are created at  the start (there are some POS coins that are dynamically created) and then miners are rewarded only in the transaction fees they process. In POS cryptocurrencies the chance of an account being chosen is random but increased by it’s wealth. So the more money you have, the faster your transaction is processed. As far as I can tell we’d still use the same mining hardware just would be allocated transactions in a different way.

I was talking to a guy yesterday about this and he seemed to prefer POS because he said that the big mining companies are dominating the market. But for me POS allows exactly the same thing. This is why my article about us all having a small mining rig, even a small amount would help diversify Cryptocurrencies (even if you’re in a mining pool, there are some amazing ones, my favourite is EOBOT.

Both systems are valid in their own context but it’s useful to understand. Etherium is looking to fork off with a POS system soon. For me I’d rather stay with what we have because it’s been working a long time and there is nothing that makes markets more jittery than change.