Proof of Work (PoW) and Proof of Stake (PoS) are two alternative methods to solve the puzzle for achieving a distributed consensus or synchronization of a blockchain. The two make crypto currency achieve what previously required a central validating authority. However, they are implemented in different cryptocurrency networks.

Proof of Work

In PoW, blocks represent the amount of quantifiable energy and time that was applied to produce them. There is always evidence that energy was used to put data in that state, and only a simple process is necessary to confirm it.

Bitcoin is one example of cryptocurrencies that use Proof of Work. Bitcoin miners use vast amounts of electricity and computer cycle time, in a race to find a solution to a puzzle while validating and adding new transactions on the blockchain.

Therefore, security is dependent on distribution and amount of mining resources i.e. computer power. Forms of the computer power used include SHA-256, scrypt, Blak-256, SHA-3, Cryptonight and their combinations

Proof of Stake

This is the alternative method of achieving consensus in a decentralized network. It uses a different form of capacity. Under this scheme, only those who hold some share or stake of the existing coins take part in validating transactions.

Unlike PoW that make use of external resources (energy), internal resources in the form of stakes are a function of participating in running this network. Stakeholders validate new blocks using their share as ‘staking power’.

In essence, coin holders are responsible for safeguarding the network and coins. They take part in forging blocks in proportion to their overall % stake. Thus, a successful attack on this network is more expensive and offers little incentive. An attacker would have to own the majority of coins, in which case they would suffer their own attack.

Forms of PoS include Proof Of Velocity Stake and Delegation based proof of stake. PoS’s first use in a cryptocurrency was in implementing Peercoin, followed later by BitShares, NXt and Blackcoin.

Since Proof of Stake is less energy, it is seen as a greener way to run a cryptocurrency network. However, Proof of Work received far much acceptance earlier, due to the success of bitcoin in the cryptocurrency space.