Proof of work vs proof of stake

Proof of work and proof of stake are the two main ways a blockchain decides who adds the next block. Proof of work makes participants spend electricity on computing. Proof of stake makes them put up coins as a deposit. Bitcoin uses the first, and Ethereum has used the second since September 2022. Both are types of consensus mechanism.

How does each one work?

In proof of work, participants called miners run specialized machines that make guess after guess at a puzzle based on a hash, a kind of digital fingerprint. The first to find a valid answer adds the next block and earns new coins plus transaction fees.

Security comes from cost. To rewrite the record, an attacker would need more hardware and electricity than all honest miners combined. The guide to crypto mining has the details.

Proof of stake has no puzzle. Participants called validators lock up the network's own coin as a deposit, known as a stake. The software picks one at random to propose each block, with larger stakes chosen more often, and the others vote to confirm it.

Validators earn rewards for doing this honestly. One that breaks the rules can have part of its deposit destroyed, a penalty called slashing. Security comes from having money at risk inside the system. People who hold coins can take part through staking.

Which uses more energy?

Proof of work, by a wide margin. Its security depends on burning electricity, and bitcoin mining draws large amounts of it. Critics point to carbon emissions and pressure on local power grids. Supporters reply that miners seek out cheap, surplus or renewable power, and that the energy spent is what makes the network hard to attack.

Proof of stake needs only ordinary computers. A research firm cited on ethereum.org, the network's main information site, estimated that Ethereum's switch cut its electricity use by more than 99.9%.

Which is more secure?

There is no agreed answer.

• The case for proof of work. It has run bitcoin since 2009 without a successful attack on the ledger. Attacking it takes physical machines and power.
• The case for proof of stake. An attacker must buy a huge share of the coins and can then lose them to slashing. Critics note it is younger and more complex, and that those with the most coins earn the most rewards.

Both face concentration. Bitcoin mining is dominated by a small number of large pools. Much staked ether sits with a few big staking services and exchanges.

Which blockchains use which?

• Proof of work: bitcoin, Litecoin, Dogecoin, Bitcoin Cash and Monero.
• Proof of stake: Ethereum, Solana, Cardano and most networks launched in recent years.

Ethereum began with proof of work and changed over on September 15, 2022, in an upgrade called the Merge. The differences between the two largest networks are covered in bitcoin vs Ethereum.