Proof of Stake and Proof of Work
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Proof of Work is a system where miners compete to validate transactions and add them to the blockchain by solving complex mathematical puzzles. The miner that solves the puzzle first gets to add the next block to the blockchain and receives a reward for their work. This system is used by the Bitcoin network, among others.
Proof of Stake, on the other hand, is a system where the creator of the next block is chosen based on the amount of cryptocurrency they hold. This means that the more cryptocurrency a person holds, the more likely they are to be chosen to add the next block to the blockchain. This system is used by the Ethereum network, among others.
The main difference between the two mechanisms is that Proof of Work is based on computational power, while Proof of Stake is based on a person’s stake in the network. This means that in a Proof of Stake system, those with more money have a higher chance of adding the next block to the blockchain and receiving a reward, while in a Proof of Work system, it is the miner with the most computational power who has the highest chance of adding the next block.
Both are methods of proving if data is “true”
PoW is people using computers running equations, consuming electricity, doing work and showing people “I believe this is true, look how much work (resources) I put into it”. If the statement is false, the work is wasted, and trust is lost in that person.
PoS is when people put a lump of money (resources) into a reserve, and say “I believe this is true, I will stake my money (resources) on it being true”. If the statement is false, they lose money and trust.
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