Recently you may have heard about the idea to take a move from Ethereum consensus based on the Proof-of-Work system.
Understanding Proof-of-Work
As the name implies, Proof of Work is the validation of the work that happened and proving that it is correct. Bitcoin and many other altcoins follow this method of consensus to ensure the authenticity of the chain of blocks.
How Does It Work?
In order to understand how PoW works in layman terms, consider that you are in a math exam sitting with other students in a classroom. The student can't just come up with the correct answer, but show the complete proof of arriving at the correct answer.
Now, mapping it to the crypto world. 'Math exam' refers to the 'transaction,' 'classroom' to the 'world,' 'student' to the 'computing hardware' running complex algorithms, 'brain power' to the 'computing power' and the 'lot of energy' to the 'lot of electric power.'
Hope this helped you understand the PoW better!
Understanding Proof-of-Stake
It's an alternative approach to verify and validate the transaction, or a block. It picks the validator by the amount of stake (coins) a validator has and the varied age of the stake. If you have 100,000 altcoins in a wallet, then it will have an age that is attached to it on how long you have it.
Here, the 100,000 xyz coins are the stake. If you move your coins from one wallet to another, then the aging gets reset. This amount acts as the security deposit, meaning that the validator holds a major amount of stake in xyz coin with good aging. This way, the chances of validating a block gets higher. PoS allows for the building of a trusted and distributed network with a higher stake of coins. The validators earns a significant part or the entire transaction fee. It's not called mining. Rather, it's called forging done by a validator who will process and produce a block to the chain.
Below are the challenges that PoS eliminates from PoW.
1. There's no need for costly hardware.
2. It doesn't consume high electrical power as PoW does.
3. There are more loyal validators.
4. Validation happens faster.
Conclusion:
Thanks to a Proof-of-Stake system, validators don't need to use their computing power because the only factor influencing their chances are the total number of their coins as well as the current complexity of the network.
This possible future switch from Proof of Work to Proof of Stake may offer the following advantages:
Loads of energy savings
A network that is more safe and secure
This indicates that in case one validator creates any 'invalid' block, then his security deposit will automatically be deleted. Not just that, his privilege to be part of the network consensus too will be deleted.