In the world of blockchain debates, one of the most heated in Proof of Work vs. Proof of Stake.
Let’s take a step back, though. What even is a consensus mechanism?
Don’t know? Don’t worry; we’ll cover it all in this article.
By the end, you’ll not only know what all these new terms mean, but you’ll be able to make a better decision on which one you think is the preferred way to run a blockchain.
In the Proof of Work vs. Proof of Stake debate, we have to start with the basics.
First of all, what is a consensus mechanism?
Basically, it’s how a blockchain network comes to an agreement. Think of it as a set of rules to keep everyone honest.
You see, for every transaction, the blockchain network has to agree on which ones are legitimate. How they come to this conclusion is based on the consensus mechanism.
Here’s a real-world example.
Let’s say you and a group of friends are deciding where to go for lunch. To end the discussion, everyone has to agree on where to eat. There needs to be a fair way to reach that decision, and, once decided, everyone in the group will go to the same place.
That’s a consensus mechanism in action.
In a blockchain network, these consensus mechanisms offer a few key functions:
Usually, the process goes something like this:
Just like that, the blockchain network processes another transaction.
This can happen thousands of times in a day, making these consensus mechanisms a foundational part of what makes cryptocurrencies work.
Now that we have the basics, let’s get to some specific types of consensus mechanisms.
Proof of Work is the type of consensus mechanism that is found on the Bitcoin blockchain network.
It leverages computer power to reach agreements.
Think of Proof of Work as a global math competition where computers solve puzzles. Winners get to add a new transaction to the blockchain.
Those who offer up their computers to solve these problems are called miners.
Here’s how it works:
Why does the Bitcoin network use Proof of Work? Well, first of all, it’s proven to be quite secure.
Since the Bitcoin network went live in 2009, it has yet to face a significant outage or compromise* (as mentioned on businessinsider.com). What makes it so hard to cheat is the fact that to participate, you have to put up significant computational power — which costs lots of money.
Additionally, anyone with the right hardware can participate.
Even with the Bitcoin mining industry developing quite rapidly, solo miners, those not associated with a mining business or mining pool, sometimes make headlines by scoring the full reward for mining a block in the blockchain (learn more at cointelegraph.com).
Proof of Stake works a bit differently.
Instead of offering up your computational power, you’d lock up coins as collateral. Think of it like a security deposit of sorts. The more coins you have locked, or staked, the more likely you are to win.
It’s kind of like a digital raffle where coins are your tickets.
Those who stake their coins are called network validators. The system will randomly select a validator to check a transaction. If you are chosen and validate correctly, you earn a reward.
If you cheat, you can lose your staked coins.
Proof of Stake makes it easier to participate. You don’t need any special computers as, in most cases, a laptop is more than adequate.
The only thing you need to do to participate is lock up (stake) your tokens.
So, Proof of Work vs. Proof of Stake: how do these two popular consensus mechanisms stack up against each other?
Let’s break it down.
Running a Proof of Work network needs a lot of computational power — and that takes a lot of electricity.
How much?
Well, Bitcoin uses around 173 terawatt-hours per year* (data from ccaf.io). For reference, the entire country of Mexico uses around 300 terawatt-hours per year* (as mentioned on statista.com). Compare that to Ethereum’s Proof of Stake network, which only uses around 5 gigawatt-hours* (data also from ccaf.io).
A substantial difference.
While many argue this is a flaw in Proof of Work, it’s actually more of a feature. We’ll dig into why in the upcoming security section.
As you may have guessed based on the earlier breakdowns, getting into Proof of Work mining takes a lot of upfront costs and ongoing expenses.
Mining computers alone can cost thousands.
There’s also running those machines, which is where that huge power consumption stat comes from.
Proof of Stake, on the other hand, is very accessible.
All you need to get started is some coins and a regular computer. You don’t need any technical knowledge, and ongoing costs are virtually non-existent.
To be fair, though, you do need to stake a certain amount of coins for the network to consider you a validator. For Ethereum, that number is 32 ETH* (the native coin, called Ether, learn more at consensys.io).
That would be around $84,000* (price as of February 13, 2025, from coingecko.com).
Here is where things get interesting.
Bitcoin’s Proof of Work consensus mechanism is the gold standard of blockchain security. Because it’s protected by real-world costs (hardware and electricity), it’s super secure with a proven track record of over 14 years of uptime.
Attacking the network would be extremely expensive and virtually impossible. Moreover, you can’t fake the work — it’s all or nothing.
Proof of Stake, on the other hand, is protected by staked coins.
It’s the new kid on the block, so to speak, and has yet to garner the same reputation as Proof of Work. Bad behavior on the network, as in bad validators, hits stakers where it hurts most: their wallets.
While rare, these “slashings,” as they’re called, do happen.
If you’re interested in participating in Proof of Work, well, get ready for some planning.
As we touched on earlier, you’ll need to pony up some cash for the computers (also known as mining rigs) and the electricity to run them.
That isn’t to say it’s not lucrative.
In fact, there are plenty of businesses out there that run mining operations. It can be quite rewarding, but it all depends on the amount of computational power you can get your hands on.
Staking for a Proof of Stake network is a bit more simple.
Not only is it more user-friendly, but you can often stake a smaller amount of coins with a validator network. This means while you won’t be a validator yourself, you’ll still be able to reap the benefits.
You can stake your coins and just let them pay you out in rewards.
So, who wins the Proof of Work vs. Proof of Stake battle?
Well, it’s kind of like comparing apples to oranges, isn't it? While each offers specific benefits, you could easily argue against both. It’s all a matter of preference.
Whether you think Bitcoin’s Proof of Work is the winner or Ethereum’s Proof of Stake, Bitcoin Depot is here for all your crypto-buying needs. You can quickly and easily buy Bitcoin from one of our over 8,400 (as of February 2025) Bitcoin ATMs across the U.S., Canada, and Puerto Rico.
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