Two Ways to Authenticate Data on a Blockchain

The Bitcoin blockchain verifies data by solving complex computations, which as we’ve seen is called Proof of Work. It takes a lot of computers to perform this function, and those computers consume massive amounts of energy. That has been a big criticism of bitcoin.

That’s why an alternative method of authentication was invented. It’s called Proof of Stake. Instead of deploying tens of thousands of computers to authenticate data in an effort to win a block reward, the PoS protocol works like a raffle.

If there are 5,000 raffle tickets and you buy one, your odds of winning are 1 in 5,000. But if you buy 1,000 tickets, your odds of winning are 1 in 5. So, the more raffle tickets you buy, the more likely you’ll win the raffle. It’s the same with PoS: the more coins you own in a PoS blockchain (the more you have at stake, get it?) the more likely you’ll win the staking reward. The PoS protocol therefore encourages people to buy and stake coins; theoretically, the price rises as more coins are bought.

While PoW and PoS are considered equal in their ability to authenticate and protect blockchains, the PoS protocol uses 99.9% less energy than PoW.