What is proof of stake? And how is it different from proof of work?
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Both systems are how new blocks are added to the blockchain.
In proof of work systems, all of the miners are given the same goal – brute-force to solve a math equation as quickly as you can. The first one to correctly solve it gets the reward – typically a port of the transaction fees associated with the new block and usually a new coin for their trouble.
These systems are falling out of favor because as the calculations get more and more difficult and more and more miners enter the fray, the energy costs associated with mining skyrocket.
In proof of stake systems, anyone with a minimum number of coins may ‘stake’ those coins – offer coins as collateral in exchange for the chance to validate the next block. For every block, a selection of random stakers are asked to perform the validation calculations for the next block on the chain. If they have a consensus, the new block is added and the validators get a portion of the transaction fees for their trouble.
Proof of stake systems are gaining favor because the reward ownership of coin rather than raw computational power. The calculations don’t need to get progressively harder – leading to skyrocketing power demands – because validation isn’t based on computational power but rather ownership of coin.
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