Proof of work vs proof of stake: what is different?


A consensus mechanism plays an important role in maintaining the integrity, security, and trustworthiness of the blockchain. Two well-known consensus mechanisms are proof of work (PoW) and proof of stake (PoS). We will help you to understand more about them!

A consensus mechanism plays a crucial role in a blockchain network because it helps to maintain the integrity, security, and trustworthiness of the blockchain. So what does a consensus mechanism mean?

A consensus mechanism is a crucial component enabling all participants to agree on the state of the distributed ledger. In other words, it ensures that all nodes in the network reach a common understanding of the valid transactions and the order in which they are added to the blockchain. Two well-known consensus mechanisms are proof of work (PoW) and proof of stake (PoS).

This article aims to give you a brief introduction of these two consensus mechanisms and discuss the key differences between them. Are you ready? Let’s dive into the world of blockchain technology now!

What is Proof of Work (PoW)?

Proof of Work (PoW) is a consensus mechanism used in blockchain networks to validate and secure transactions in a decentralized manner, operating based on computational work and mining to determine the creator of a new block. PoW is prominently associated with Bitcoin, the first and most well-known cryptocurrency, but it is also used in various other blockchain networks.

How Does Proof of Work Work?

Generally, PoW requires participants, known as miners, to solve complex mathematical problems using computational power. Then, the first to solve the problem gets the right to create a new block and add it to the blockchain.

To give a more detailed perspective, here is a step-by-step guide on the procedure of how Proof of Work works as below:

Step 1: Transaction propagation

Users initiate transactions by sending them to the network. These transactions are broadcasted to all nodes in the network. Initially, transactions are unconfirmed and are held in a pool of unconfirmed transactions.

Step 2: Mining Competition

Miners, participants in the blockchain network, select a set of unconfirmed transactions and try to form them into a new block.

Then, after the miners’ nodes gather a list of transactions, and along with some other data (like a timestamp and a reference to the previous block), they start working on solving a complex mathematical puzzle. For more detail, this mathematical puzzle, also known as hash function, requires miners to find a specific number (nonce) that, when combined with the block’s data, produces a hash that meets certain criteria (e.g., starts with a certain number of leading zeros).

In other words, it becomes a competition in which miners will need to iteratively try different nonce values until they find one that satisfies the criteria, which makes this process require significant computational power. Because multiple miners are simultaneously attempting to solve the puzzle for the same set of transactions, this competition ensures that the process of adding a new block is decentralized. Therefore, this mathematical puzzle is considered to be designed to be hard to solve but easy to validate.

Step 3: The winning miner verification

At the end, the miner who successfully discovers the solution to the puzzle first will broadcast it (including the nonce) to the network for validation. After that, other nodes in the network quickly verify the answer by checking if the hash produced by the winning miner meets the criteria. If valid, the block is accepted by the network; if not, it is rejected.

Step 4: Block Addition to the Blockchain

Once the block is accepted by the majority of the network, it is added to the existing blockchain, which means that the new block now contains a reference to the previous block, creating a chain of blocks.

Step 5: Consensus & Reward for the Winner

The blockchain that is deemed valid is the one that is the longest and has the highest cumulative proof of work. After that, nodes in the network follow the longest chain, reaching a consensus on the state of the ledger.

At the end, the newly produced cryptocurrency (coinbase reward) and transaction fees from the transactions included in the block are then given to the winning miner who successfully mined the block.

The blockchain is continuously extended by repeating this process with every new block. The mathematical puzzle’s difficulty will be flexibly modified to maintain a consistent block creation time.

Advantages and Disadvantages of Proof of Work

Based on the overview of Proof of Work as aforementioned, it is shown to have some noticeable advantages and disadvantages as follows:

Benefits of Proof of Work

  •  Provide a high level of security to an entire large network: In PoW, the computational effort required to solve complex mathematical problems makes it challenging and economically impractical for malicious actors to attack the network.
  • Promote a decentralized network: PoW provides a decentralized manner of validating transactions, in which miners from around the world can participate. Therefore, no single entity or group can have control over the entire network.
  • Provide attractive incentives for miners: PoW allows miners to be rewarded with newly created cryptocurrency and transaction fees for their efforts by giving economic incentives to maintain and secure the network.

Drawbacks of Proof of Work

  • Environmental Impact: In the Proof of Work systems, the process of mining involving solving complex mathematical problems, requires substantial computational power and, consequently, a large amount of electricity. As an illustration, Digiconomist has noted that the global energy consumption from bitcoin mining has grown 101% within one year as of 20th Dec 2023.
  • Inefficient costs: Mining requires specialized hardware, and as technology advances, older hardware becomes obsolete. This can lead to a constant cycle of expensive hardware upgrades.
  • Potential for 51% Attacks: Although Proof of Work blockchains can help to secure the network when there is a large network of miners participating. However, in the case of a small network, in which a single entity or coalition controls more than 50% of the network’s computational power, there is still a high possibility of hacker attack reaching up to 51%.

What is Proof of Stake (PoS)?

Proof of Stake (PoS) is an alternative consensus mechanism to Proof of Work (PoW) and operates on a different principle to secure and validate transactions. Unlike the PoW system, the networks employing the PoS procedure will choose validators to create new blocks and validate transactions based on their ownership of cryptocurrency they hold and are willing to “stake” as collateral.

How Does Proof of Stake Work?

Apart from competing to solve riddles in PoW, PoS’s consensus technique picks validators based on their stake. This architecture promises to offer a more scalable and energy-efficient alternative to PoW.

To give a more detailed perspective, here is a step-by-step guide on the procedure of how Proof of Stake works as below:

Step 1: Staking

Participants, so-called validators, need to lock up a certain amount of coins as collateral, which is referred to as “stake”. Then, they will be chosen to form new blocks and verify transactions according to the amount of cryptocurrency they have staked. In other words, the higher the stake, the higher the probability of being selected to create a new block.

Step 2: Transaction Propagation

Users initiate transactions, which will be broadcasted to the network. Initially, they are unconfirmed. After that, validators will propose new blocks that include a set of transactions to be added to the blockchain. The selection of validators to propose blocks is often randomized and influenced by the amount of coins staked.

Step 3: The winning miner verification

Other nodes in the network validate the eligibility of the proposed block. This verification process typically involves checking the digital signatures on transactions and ensuring that the proposed block follows the rules of the protocol.

Step 4: Consensus and Block Addition to the Blockchain

When a majority of nodes agree on the validity of the proposed block, mainly based on the weight of the validators’ stakes, consensus is finally reached. Then, if the proposed one has been accepted by the network, it will be added to the blockchain.

At the end, validators are rewarded for their role in creating new blocks and validating transactions. Rewards typically include transaction fees and, in some cases, newly created cryptocurrency. Validators may also face penalties (slashing) for malicious behavior or attempts to attack the network.

Advantages and Disadvantages of Proof of Stake

Compared to Proof of Work, Proof of Stake has more benefits in some aspects. However, it still needs to improve some dimensions to lessen possible threats to consider.

Benefits of Proof of Stake

  • Reduced Environmental Impact: Because the PoS works based on the staking mechanism, it consumes significantly less energy.
  • Economic Incentives: Validators in PoS systems have a financial interest in maintaining the integrity of the network. They have “skin in the game” through the cryptocurrency they have staked, providing economic incentives for them to follow the rules and secure the network.
  • Scalability: With the absence of resource-intensive mining allows for quicker block validation and propagation, potentially improving the overall transaction throughput.

Drawbacks of Proof of Stake

  • Nothing at Stake Problem: Because the PoS systems work based on the validators’ stake, there will be a risk that validators could support multiple conflicting chains simultaneously without risking their staked assets. Although there have been various mechanisms implemented to address this problem, it still remains a potential concern.
  • Centralization Risks: If a small number of entities or large stakeholders dominate the network, this concentration of power can undermine the decentralization goal.
  • Complexity in Implementation: Implementing a PoS consensus mechanism can be complex, because it requires careful consideration of economic models, governance mechanisms, and other parameters. A poorly designed PoS system may lead to unintended consequences.

Proof of Stake vs Proof of Work: Key Differences & Key challenges of Implementing and Maintaining

Security and Reliability

  • PoW: PoW systems often promote a more decentralized network since miners compete to solve complex mathematical problems to validate transactions and create new blocks. Therefore, PoW is considered reliable. The longest chain with the most cumulative work is considered the valid chain.
  • PoS: Since the criteria of the validators selection process is based on the amount of coins they are willing to stake, PoS is designed to align validators’ interests with the network’s security. However, depending on the system implementation, the reliability of PoS systems might face concerns related to centralization, where validators with more resources can have more influence over the network.

Scalability And Transaction Throughput

  • PoW: Since it works based on resource-intensive mining, a very large number of transactions are executed per time. Therefore, PoW consensus could face scalability issues. Moreover, it leads to longer confirmation waits as well as increased transaction fees.
  • PoS: Since PoS works on the mechanism of staking, its potential for scaling is much greater. As a consequence, it could lead to faster transaction processing, increasing throughput and decreasing fees.

Sustainability and Environmental Impact

  • PoW: PoW requires miners to solve complex mathematical problems through a process known as mining, which is computationally intensive and demands substantial energy consumption, mainly due to the competition among miners to find the solution first. Moreover, mining farms, where large numbers of specialized hardware are deployed, consume substantial amounts of electricity, which could lead to the carbon footprint and environmental impact of PoW networks.
  • PoS: Since PoS does not rely on energy-intensive mining processes, the overall energy consumption is considerably lower. In other words, the lower energy requirements make PoS networks more environmentally friendly.

Future of Proof of Work and Proof of Stake

At the present, based on the comprehensive analysis of Proof of Work vs Proof of Stake aforementioned, there are still many areas for development to make blockchain consensus mechanisms more efficient, sufficient and scalable. The PoS, which consumes less energy and has higher possibility of scalability, is anticipated to have more potential for being widely used.

In the future, it is anticipated that there will be more initiatives or protocols produced to create a new consensus mechanism that could balance efficiency, decentralization and security.


Selecting the most suitable consensus mechanism for blockchain networks is really challenging because it can impact the security, scalability, energy efficiency, decentralization and economic implications. Therefore, understanding the key differences between Proof of Work vs Proof of Stake is highly important. In the future, it is anticipated that there will be more initiatives for hybrid and alternative consensus techniques to lessen all drawbacks of the current practices, fostering the growth of blockchain technology.

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