This website does not cater to a British audience. If you are visiting this website from the United Kingdom, kindly leave this site without delay.

What are proof of Work and Proof of Stake consensus mechanisms

Isabella S. | 21 September 2023

Understanding Proof of Work and Proof of Stake Consensus Mechanisms in Cryptocurrency

In the world of cryptocurrencies, consensus mechanisms play a vital role in maintaining the integrity and security of blockchain networks. Two prominent consensus mechanisms are Proof of Work or PoW and Proof of Stake or PoS. In this article, we’ll explore what PoW and PoS are, highlight their differences, list some cryptocurrencies that utilise each mechanism, and delve into the goals and implementations of these systems. We’ll also discuss which consensus mechanism Bitcoin and Ethereum use.

What is Proof of Work?

Proof of Work is the original consensus mechanism introduced by Satoshi Nakamoto in the Bitcoin whitepaper in 2008. It is a competitive process in which miners solve complex mathematical puzzles to validate transactions and add them to the blockchain. The first miner to solve the puzzle gets the right to create a new block and is rewarded with newly minted cryptocurrency and transaction fees.

Goals of Proof of Work:

  • Security: PoW ensures the protection of the blockchain network by making it computationally expensive to attack. An attacker would need more computational power than the entire network, making it highly unlikely.
  • Fair Distribution: PoW rewards miners for their efforts, ensuring an equitable distribution of newly created coins to those who contribute to the network’s security.

Cryptocurrencies Using Proof of Work:

  • Bitcoin (BTC)
  • Ethereum Classic (ETC)
  • Litecoin (LTC)
  • Bitcoin Cash (BCH)
  • Monero (XMR)

What is Proof of Stake?

Proof of Stake is an alternative consensus mechanism that eliminates the competitive mining process seen in PoW. In PoS, validators (sometimes called “forgers” or “stakers”) are chosen to create new blocks and validate transactions based on the number of coins they hold and are willing to “stake” as collateral.

Goals of Proof of Stake:

  • Energy Efficiency: PoS is often considered more environmentally friendly than PoW because it doesn’t require the vast amount of computational power associated with mining.
  • Security and Fairness: PoS systems aim to secure the network by requiring validators to have a stake in the cryptocurrency. This aligns their incentives with the network’s security.

Cryptocurrencies Using Proof of Stake:

  • Ethereum 2.0 (ETH)
  • Cardano (ADA)
  • Polkadot (DOT)
  • Solana (SOL)
  • Tezos (XTZ)

Bitcoin and Ethereum

Bitcoin primarily utilises the Proof of Work consensus mechanism. Miners compete to solve complex mathematical puzzles, and the network adjusts the difficulty to maintain a consistent block production time.

Ethereum is in the process of transitioning from Proof of Work to Proof of Stake. Ethereum 2.0, or ETH 2.0, is the upgrade that will bring about this change. It aims to improve scalability and reduce energy consumption by replacing miners with validators who stake ETH.

In cryptocurrencies, consensus mechanisms like Proof of Work and Proof of Stake are essential components determining how transactions are validated and new blocks are added to the blockchain. While PoW has been the cornerstone of many blockchain networks, PoS is gaining traction due to its energy efficiency and potential for scalability. Understanding these mechanisms is crucial for anyone interested in crypto, as they impact everything from security to environmental sustainability in the blockchain industry.


Restricted Service Availability for Retail Clients in the UK. Please note that the services provided on this platform are presently unavailable to Retail Clients residing in the United Kingdom.