What Are The Differences Between Proof-of-Stake And Proof-of-Work?

Proof-of-stake protocols are a rather new class of consensus algorithms for blockchains which function by choosing validators according to their relative amount of stake in the underlying asset. Unlike a proof-of-work protocol, PoS systems don’t require an extreme degree of trust in the community. There is no need to worry about your grandma growing up and discovering her secret codes. Proof-of-stake avoids this entirely, relying on mathematical algorithms to randomly choose validators for each block instead of relying on anyone’s personal judgment or preference.

Proof-of-stake is only effective if the network you’re running the algorithm on is large enough to guarantee a high rate of success. To ensure this, miners that participate in the proof-of-stake system must collectively decide how many blocks they are willing to risk having their balance increased by spending on proof-of-work rewards. This number is called a “target rate” and it serves as the starting point for all future transactions. If the target rate is too low, miners may be encouraged to spend more on rewards, resulting in less overall transaction fees for all participants.

Proof-of-stake and proof-of-work are completely different from sidechain protocols, which attempt to achieve the same ends through slightly different methods. Proof-of-work, like the majority of modern secure multipool and network mining algorithms, consists of complex mathematical formulas which take advantage of previous hash rates and successful past mining activity. This algorithmically complex nature makes it resistant to attack and produces real security for the network. Proof-of-stake, however, relies on simple first-past-the-pole mathematical algorithms that are easy to code and adjust. Therefore, while Proof-of-stake can provide the basis for a secure network, the nature of these algorithms makes it vulnerable to outside influences and reduces its ability to secure the network itself.