Proof-of-Work and Proof-of-Stake: what is it in simple terms?

 Proof-of-Work and Proof-of-Stake: what is it in simple terms? The key feature of this mathematical problem is asymmetry: it should be moderately difficult for the miner, but easy enough for the network as a whole. This is achieved through cryptography. Every miner in the network tries to solve the problem first; at the same time, it can actually be found only by direct enumeration, so many attempts are required for a successful solution. An example, perhaps a little fantastic, but illustrative. Imagine being handed a keyboard with several million numbered keys. You are looking for exactly the key that you need to complete the task correctly, but you do not know its number, so you sort through everything. There is a crowd around you, also looking for the right key. Suddenly you found the right key, tell everyone “guys, I found the key, its number is 22 875”. Everyone around starts checking key number 22875, and oh yes, it is. The one who finds the key first wins a prize. Each is th...

How did Proof of Stake come about?


 How did Proof of Stake come about?

This algorithm was first mentioned in 2011. Then the developers S. Nadal and S. King dealt with the issue of reducing energy consumption when mining cryptocurrency. An active discussion was conducted during the forum, which is dedicated to cryptocurrency. Then the functioning of the blockchain cost the community about 15 thousand dollars for 1 day.

The high energy cost of using the Proof of Work algorithm consisted in carrying out a large number of computational operations. Gradually, the load on the system grew, although the calculations did not have any practical value. All expenses did not have any significant justification, which forced the developers to seriously revise the algorithm. For this reason, the development of a different method of proving the correctness of the transaction began, which became Proof of Stake. In the new system, it was easier to predict who would open a new block, as they were large coin holders and investors with rarely moved savings.

The Peercoin cryptocurrency code served as the first implementation of the new algorithm. The practical implementation of high energy efficiency has attracted the attention of electronic coin investors. This was the impetus for the emergence of several more coins on the Proof-of-Stake algorithm. Among them, it is worth noting BlackCoin, ShadoeCoin, NXT and others.

Initially, the logical structure of the algorithm provided protection against the dominance of large coin holders. A large amount of cryptocurrency increases the chance of opening a new block, but the coins are frozen for some time and cannot be used. At first, the owners of 3% of the coins produced 4% of the blocks.