A key challenge of blockchain technology is figuring out a way to prevent any single node within the distributed network from gaining the computational power and motivation to launch what is called a “51% attack,” where someone is able to overpower the entire system and verify fraudulent transactions to advance their their own interests. This challenge is mitigated by two different verification systems, Proof of Stake (PoS) and Proof of Work (PoW), which I will seek to introduce below (at least in a basic sense). There is an ongoing debate about which system is preferable to the other, but many high-profile blockchains such as Ethereum seem to be leaning towards PoS systems for the sake of speed and efficiency, despite PoW being theoretically the better for security.
So what is proof of work?
Glad you asked! Proof of work is the traditional block verification technique that Bitcoin and Ethereum were both built on at their inception. The idea is that in order to verify a new block, the miner must solve a difficult math problem that can only be solved through guess and check. In the case of Bitcoin, such a system is extremely resistant to a 51% attack on the network due to the exorbitant cost of assembling enough computational power to be able to solve the math problems faster than the rest of the network combined. As Bitcoin continues to grow, such a proposition will become even more infeasible, thus essentially eliminating the chance that the Bitcoin blockchain will ever be susceptible to hacking.
While that’s all well and good, the PoW system can be somewhat clunky and inefficient at scale; with thousands of transactions taking place every second — each of which must wait to be placed into a block and mined — it can become a hindering factor for a computer to have to guess at the answer to a math problem over and over before finally getting it correct. Furthermore, all of the energy required to mine and validate blocks has a considerable ecological impact. To illustrate this point, current estimates put the annual energy consumption of Bitcoin equivalent to the amount of energy present in 590,000,000 US gallons of gasoline. While this isn’t an overwhelming figure when compared to the ecological impact of mining real gold, it still presents an opportunity for Bitcoin, and blockchain technology at large, to become more efficient and to minimize adverse effects wherever they may appear.
Enter proof of stake!
Proof of stake directly delegates the power to verify transactions based on the value of the crypto assets you own. This is a much simpler way to verify new blocks, and allows the blockchain to operate more efficiently at scale. In order to launch a 51% attack on the system, someone would have to own 51% of the value of the assets which is prohibitively expensive in the case of established blockchains such as Ethereum and Bitcoin, but also illogical when considering that anyone who owns a 51% stake would not have any incentive to sabotage the security of their own assets. Finally, proof of stake is more equitable given the fact that the only requirement to becoming a miner is having a stake in the system, rather than having to go out and invest in specialized computational equipment to solve the proof of work math equations.
What do you think about proof of stake vs. proof of work? Do you support Ethereum considering a switch to proof of stake? Comment below!