Topic: Proof of Work vs. Proof of Stake. Know the Difference (Read 135 times)

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Understanding the Difference Between Proof of Work vs. Proof of Stake


In the world of cryptocurrency, there are a couple of different ways to verify and validate a block or transaction. Participants need to understand Proof of Work vs. Proof of Stake as two different methods that achieve a similar result. There are many opinions regarding which system—Proof of Work or Proof of Stake—is better. Anyone who wants to get involved with cryptocurrency needs a deeper understanding of these two systems.

Cryptocurrency Transactions 101
It’s impossible to discuss Proof of Work vs. Proof of Stake without going over the basics of cryptocurrency and how it is created and distributed. Virtual or digital currency that is secured by cryptography is known as cryptocurrency. It is exchanged via account to account transactions with no third party, such as a bank.

To ensure that cryptocurrency transactions are legitimate, they reside on a blockchain, which is a public ledger that is shared between many different computers. The blockchain is permanently recorded transactions.

Every type of cryptocurrency needs a way to validate the work and prove to everyone else that it is correct. Proof of Work and Proof of Stake have to do with the different methods that people use to collect coins, validate a transaction and ensure its correctness.

What is Proof of Work?
The Proof of Work (PoW) system is driven by output and competition. Miners dedicate their computer’s processing power to unlock algorithm puzzles to successfully verify a transaction. There are many miners competing on various transactions. The first one to solve the encryption wins a block reward, or a certain amount of that transacted currency. Their reward appears on the public ledger, verifying the integrity of the cryptocurrency.

Many analogies have been created to try to explain the Proof of Work system to people who are just getting into cryptocurrency. The most common description is of a math competition or test, where different students are working to resolve a math problem. The student who solves the problem first gets the prize and the answer is shared with the rest of the class.....

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