PoS (proof of stake) v. PoW (proof of work)
If you're on this page, you've probably seen the terms "PoS" or "PoW" and are wondering what the heck they mean. PoW means "proof of work" and the prototypical PoW coin is Bitcoin. PoS means "proof of stake" and there is currently a large push in many cryptos to switch from a PoW to a PoS system. Some of the big names thinking about PoS are Ethereum (with their "Casper" protocol) and Cardano (Ouroboros protocol).
In order to understand the nuances between PoS and PoW protocols, it is necessary to explain what they are and how they work.
PoW protocols rely on miners to secure the network and ensure transactions are processed. The miners use electricity inputs (with hardware / mining equipment) and the resultant outputs is "hash rate". Although this explanation is overly simplistic, it conveys the basic process well. Miners, in a PoW system, compete to solve blocks and the reward for one who solves a block is paid in the coin being mined according to a predefined pay schedule. The algorithms used to solve blocks tend to vary in difficulty based on the amount of aggregate hash rate being used to secure the network. The variance in difficulty is necessary to ensure the blocks are not solved too quickly or slowly. Bitcoin blocks are solved 4 times slower than Litecoin blocks. One is not better just because it is faster, although blocks that are solved more often does result in a quicker overall transaction speed for the network. In a pure PoW system, the coin economy will die if there are no miners supporting it. Likewise, as the overall hash rate of a coin increases, the more secure the network becomes.
PoS, on the other hand, completely eliminates the need for miners. A PoS system relies on a connected network of nodes (again, this is drastically overly simplistic) to secure the network. In order to support a PoS coin, one must download a 'client' for the coin (these can either be full-nodes, which download the entire network and every block ever mined, or lite-clients, which do not download the entire block but instead process ongoing transactions and use less space on one's computer). The PoS system relies on these nodes, and without them, it will fail. In order to encourage people to keep their node active, PoS systems reward users who 'stake' their coins every so often by paying staking users with processing fees. When coins are 'staking', they are weighted based on the amount of coins being used to stake. The idea is that users who stake the most coins are less likely to want to try and attack the network and are thereby the most trustworthy. When coins are staking, they cannot be spent (although you can end the staking process at any time with the click of a button and can resume staking just as quickly). There are a few interesting side-effects of a pure PoS system, namely: (1) the people with the most coins benefit the most from a staking system because the payout is weighted based on the amount of coins that are staking; and (2) the network has no inherent value because there are no actual costs (as there are with mining) which means the network can be a lot more volatile and subject to the whims of consumer demand and speculation.
There are also hybrid PoS and PoW systems, which we believe to be the best system if implemented properly. One example of a PoS / PoW hybrid system is DeepOnion (although they may be switching to a pure PoS system in the next year or so if the community votes to do so via the platform's VoteCentral feature).
Learn more about PoS v. PoW and the best arguments for and against either system:
3. Vulnerable? Ethereum's Casper Tech Takes Criticism at Curacao Event: https://www.coindesk.com/fundamentally-vulnerable-ethereums-casper-tech-takes-criticism-curacao/
4. Why PoS is Better than PoW: https://decentralize.today/why-pos-is-better-than-pow-2dc3cd9881a7
5. Proof-of-Work (PoW) is not very secure and is and electricity drain: https://firstname.lastname@example.org/proof-of-work-pow-is-not-secure-has-no-future-and-its-electricity-usage-is-a-cancer-that-would-ce8ecffbe474