Proof-of-Work and Proof-of-Stake are the most popular consensus algorithms in cryptocurrencies among the miners. They offer proof mechanisms with different structures. Mining allows the infrastructure of the blockchain to work. Due to the lack of centralization in a distributed network, users make all the calculations. However, they need payment for the network support. There are different approaches for that. We will describe two most common of them below.
This is a classic version of mining, which is used in Bitcoin and many other cryptocurrencies. The point is that miners compete in their computing power for mining the block, issuing the new coins and receiving the commission. This protocol protects distributed systems from different cyber attacks (for example, DDoS) and spam. This concept was invented in 1993 by C. Dwork and M. Naor. However, only in 1999 M. Jacobson and A. Juels gave it such a name. And then, Satoshi Nakamoto introduced PoW into the basis of Bitcoin network for reaching consensus. PoW ensures the ability of network node to check the calculations made by the miner.
This is another option of transaction verification and consensus maintenance. Its main point is the use of stake as a resource, determining which network node will have the right to mine the new block. Here the difficulty is allocated in proportion to the number of coins in users. In this case, the greater the balance of the node, the higher is the chance of creating a block. The idea of PoS was initiated in 2011 on the forum ‘BitcoinTalk’ and was first realized in 2012 in cryptocurrency PPCoin (present name of Peercoin). In contrast to PoW, where the algorithm rewards miners for computing for the confirmation of transactions and creation of the new blocks, PoS system predetermines the creator of the new block based on his/her balance.
There have been long disputes between the adherents of Proof-of-Work and Proof-of-Stake, but they are theoretical. In practice, it turns out that the developers of blockchain systems play the main role in the provision of safety and reliability. In this, many agree that the hybrid version of these consensuses can be the safest option. This approach is already commonly used. Many cryptocurrencies have a PoW stage, when the coins are issued with the help of classic mining, and a PoS stage, when the emission ends. And still, despite the ease and reliability of PoS systems, serious cryptocurrencies are unwilling to abandon PoW.