Proof of Work vs. Proof of Stake: Pros and Cons


A consensus mechanism is used to validate each block that is added to the chain of a blockchain network. These mechanisms prevent fraudulent transactions by allowing the nodes on the blockchain to agree upon each block transaction’s accuracy. Every blockchain network requires a consensus mechanism to validate each new block added to the chain. Proof of Work (PoW) and Proof of Stake (PoS) are the commonly used consensus mechanisms used in the blockchain world. Read on to get acquainted with these mechanisms and find the right one for your blockchain-based application.


What is Proof of Work?

The PoW consensus mechanism is well-known and widely used, popularized particularly by Bitcoin. It gained its popularity after Satoshi Nakamoto mentioned it in the Bitcoin whitepaper to shield fraudulent transactions.

Proof of work is characterized by cryptographic equations, which the miners or nodes on a network compete to solve. In the case of Bitcoin, the first miner to solve the puzzle receives a block reward, i.e., a freshly minted Bitcoin. A new block of the transaction is added to the existing chain of blocks after the puzzle is solved.

The puzzles are difficult to solve, although once the miner finds the answer, it is easily validated by the remainder of network. To solve these puzzles, a reasonable amount of time and computational power is used. The complexity of the puzzle increases as more blocks are added to the chain.

This mechanism is not insulated to 51% attack; in a hypothetical scenario, a group of miners controlling 51% of the computational power can attack the network. They can create fraudulent transactions, stop transactions on the network, or invalidate the transactions.


What is Proof of Stake?

Ethereum miners have introduced a proof of stake consensus mechanism as a potential alternative. Like PoW, Proof-of-stake mechanisms are designed to verify new blocks’ accuracy to be added to the existing chain and to validate transactions. The process of both the mechanism is quite different.

PoS model depends on how much of cryptocurrency a validator owns and puts on’ stake’ Whereas proof of work models positions all nodes on the network equally, dependent only on who solves the mathematical equation first. The stakeholders can validate the transaction equivalent to their stake ownership. For instance, a validator owning 4% of the stakes in the blockchain network would be able to validate only 4% of the transactions. It also reduces the chance of 51% attack on the network.

PoS was created as an alternative in order to reduce the amount of electricity consumption by PoW mode.




Pros and Cons of PoW and PoS: 

Each model’s major differences are summed up below by breaking down the pros and cons of PoS and PoW.

Pros of Proof of Work model:

  • This model makes the network more difficult and costly to attack.
  • Miners are rewarded with a block reward and a share of the transaction fee.
  • It leads to more decentralized networks.

Cons of Proof of Work model:

  • It requires a lot of computational power to solve the equations; the power is wasted after the equation is solved.
  • This method could impact the environment due to the excessive usage of electricity.
  • It results in long-term disincentives to mining as newly minted cryptocurrencies near the cap.

Pros of Proof of Stake model:

  • It is more energy-efficient as it does not require a lot of computational power as compared to the PoW model.
  • It delivers better rewards to the validators.

Cons of Proof of Stake model

  • It results in a less decentralized network.
  • It is more susceptible to low-cost attacks and is less secure.


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