There are two main types of cryptocurrencies, those based on Proof of Work (PoW) and those based on Proof of Stake (PoS). Bitcoin is the most well-known cryptocurrency and it uses a PoW system.
Ethereum is the second largest cryptocurrency and it uses a PoS system.
So, what is the difference between these two systems? And, more importantly, which one is better?
Proof of Work vs Proof of Stake
The main difference between PoW and PoS is how new coins are created. With PoW, miners compete against each other to solve complex mathematical problems.
The first miner to solve the problem gets to add a new block to the blockchain and receives a reward in the form of new coins. The process of mining requires a lot of energy and computing power, which is why miners are usually rewarded with transaction fees as well as new coins.
Proof of Stake, on the other hand, does not require mining. New coins are created when users stake their existing coins by holding them in their wallets.
The more coins you stake, the higher your chances of being chosen to add a new block to the blockchain. When you are chosen to add a new block, you receive a reward in the form of new coins.
So, which system is better?
There are pros and cons to both systems. PoW is more secure because it is harder to 51% attack than PoS.
A 51% attack is when someone controls more than 50% of the network’s computing power and can used it to double-spend coins or prevent other users from confirmings transactions. However, PoW uses a lot of energy and computing power, which makes it less sustainable in the long run.
PoS is more sustainable because it does not require mining, which means it uses less energy and computing power. It is also faster because transactions can be confirmed almost instantly.
However, some people believe that PoS is less secure because it is easier to 51% attack than PoW.
So, what is the verdict? Is Bitcoin a PoS or PoW?
Bitcoin is a PoW cryptocurrency because it uses mining to create new coins. Ethereum is a PoS cryptocurrency because it uses staking to create new coins.
Both systems have their pros and cons, but ultimately it comes down to personal preference.