Ethereum proof of work and proof of stake

Overview of proof of work and proof of stake concepts.

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What is the Proof of Work protocol?

Proof of work is a simple protocol, created in order to combat cyber-attacks. Such as DDoS, which stands for, distributed-denial-of-service. DDoS attacks spam a computer or network with fake requests, thus, slowing down its speed and making it lag.

It’s important to note that the proof of work concept was introduced to the world before the bitcoin and applied Blockchain technology. The concept stems back to as far as 1993 when it was introduced by Moni Naor and Cynthia Dwork. But the actual term “PoW”, was thought up by Ari Juels and Markus Jakobsson a few years later.

Proof of work is extremely important, it is essentially what allows trustless and distributed consensuses to exist.

What’s is a trustless and distributed consensus?

Well, what it means is that you don’t need to harbor any trust for 3rd parties or middlemen when you want to receive or send money to someone else.

Think of traditional banks, like CitiBank, Sberbank, Santander. They all store your private information in their databases. PoW eliminates the need for all of that nonsense.

In the Blockchain environment, everyone can see all of the transactions that have ever occurred. So, basically, everyone has a copy of what happens on the Blockchain. Thus, any transaction or information can be easily verified.

Mining utilizes Proof of Work concepts.

Miners utilize proof of work concepts for calculating the trustless transactions that fill up blocks on the Blockchain. But, miners? Why do we need them?

Well, miners verify the authenticity of all transactions in a Blockchain ecosystem, effectively curbing the issue of double-spending. New cryptocurrencies are also provided to miners as rewards for verifying transactions.

Let’s go through the process of what actually happens to a transaction on a Blockchain.

They are all collected on a block. Miners verify all of the transactions on a block by solving mathematical cryptographic algorithms, in order to ensure that all transactions on a given block are indeed authentic. A miner gets a reward for solving these mathematical equations. Transactions that are verified and deemed authentic get added to the Blockchain. Once all of this happens, the whole network becomes notified that a transaction is added.

Miners always compete to verify a transaction. In order to do so, they utilize large amounts of computing power. Mining is a naturally competitive practice. Thus, they have to constantly up their efficiency and become more effective in their computational power. A new block on the Blockchain network, for example, is created every few minutes.

Developers of the Ethereum network operate under a consensus system known as proof of stake.

Let’s get into the concepts of proof of stake, shall we?

What is a Proof of Stake?

Proof of stake is a different way to validate transactions in order to reach a decentralized consensus.

Under the proof of stake protocol, a block creator is selected based on his wealth. Stake, get it? Additionally, in a proof of stake network, there are no block rewards. Instead, miners get the cryptocurrency transaction fees.

Why does Ethereum want to utilize Proof of Stake?

In a proof of work ecosystem, Blockchain miners must utilize a lot of computational energy. Can you imagine that a little while ago (2 years), 1 bitcoin transaction verification drew close to as much power as did almost two American households?

Power consumption was a big issue and still is actually. Thus, the Ethereum community wants to utilize proof of stake, to consume less power.

So, Ethereum developer’s kind of had a humanitarian goal in mind when they considered switching over to PoS.

Is PoS safer?

Hard to say, skeptics definitely do exist. In a PoW ecosystem, bad actors, or unethical users are eliminated thanks to economic and technological barriers.

Successfully attacking and screwing up a PoW network is a ridiculously expensive endeavor. Actually, you would probably spend more money trying to mess up the whole PoW network than you would actually be able to steal.

A proof of stake network would be cheaper to breach than a proof of work one. Thankfully, Mr. Buterin is a master tech Jedi and developed the Casper protocol, which, under the right circumstances can strip bad actors of their deposit.

“Economic finality is accomplished in Casper by requiring validators to submit deposits to participate, and taking away their deposits if the protocol determines that they acted in some way that violates some set of rules (‘slashing conditions’).”

-Vitalik Buterin


Ultimately, the switch to a proof of stake system will provide for more energy efficiency and protection from bad actors.



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