What are Proof of Work and Proof of Stake?

What are Proof of Work and Proof of Stake?

Before Satoshi Nakamoto released Bitcoin, he was 3rd in the system. He wanted to create a mechanism by which transactions made without the need for a party could be approved. Satoshi, who continued to work on this request, thought that this could be achieved through a consensus mechanism. Introduced the Proof of Work mechanism. With the emergence of this mechanism, which is based on cryptography, the transition to crypto coins has taken place. 3. On blockchains transactions could be carried out without the need for a party. Therefore, the Proof of Work mechanism has gained an important place in the crypto ecosystem as a system that is the basis of many cryptocurrencies as well as being the first consensus system. But it requires the submission of a proof of work called Proof of Work. In the crypto ecosystem, this proof of work is also carried out by mining.

You may be interested: How does PoW and PoS work?

Miners create new blocks by decrypting ciphers shaped by advanced mathematics based on cryptography on the blockchain and receive rewards from the blocks they create. In this way, it allows the supply of coins to the market and various transactions. However, the problem at this point is the energy consumption that miners need to be able to decrypt these ciphers, these codes. More powerful devices began to be required for these ciphers, which increased in difficulty day by day, to be solved and new blocks to be created, and energy consumption increased considerably. For example, there are reports that the energy cost of Bitcoin mining today is 16% more than Ireland’s annual consumption. Given such a huge energy consumption, both in terms of expenses and the damage to nature, it became clear that a new unanimity mechanism was needed. This new mechanism was called Proof of Stake.

The Proof of Stake mechanism was introduced in 2012 by Scott Nadal and Sunny King. This model, which was presented as a solution to eliminate problems such as energy consumption and costs, made radical changes in the mining system. The Proof of Stake mechanism has a more complex infrastructure than PoW, but its basic principle is to create new blocks by locking a certain amount of crypto money into the network. In this mechanism, the coins are locked into the blockchain network and the shareholders who lock them are given a mining reward. Thanks to this system, there is no need for expensive mining equipment and high energy consumption. The Proof of Stake system has been preferred by most crypto money projects in 2017 and after. In addition, Ethereum’s transition to the PoS system with the 2.0 update has increased the interest and confidence in this new consensus mechanism. Avalanche, which currently uses the consensus called Proof of Stake, implemented PoS technology before Ethereum.

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