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LESSONS

Proof of work versus proof of stake

Proof of work ties security to real resources anyone can buy. Proof of stake ties it to existing wealth, concentrates control and recreates the system it was meant to replace.

6 MIN READ
COURSE · Why Bitcoin onlySTAGE 4 · GO DEEPLESSON 2 OF 8
Two panels comparing proof of work and proof of stake.
LEVEL · Intermediate
IN THIS LESSON · 2 OF 8
BY THE END YOU WILL BE ABLE TO ANSWER
  • In proof of stake, who has the most influence?
  • Where does the cost of attacking Bitcoin come from?
  • Which system uses almost no energy, and what does the lesson say that costs?
  • In proof of stake, to control a third of validation you need a third of the stake. In proof of work, what do you need a third of?

Then prove it: a 3-question quiz · a challenge. The lesson marks itself complete at 100%.

After this lesson you can: explain the difference between proof of work and proof of stake in one minute.

How each works

Proof of work: miners spend electricity to find valid blocks. Anyone can join by buying hardware and power. Influence costs resources from outside the system, every day.

Proof of stake: validators lock up the token and are chosen to produce blocks in proportion to their stake. Influence is proportional to existing wealth, and rewards go to those who already hold the most.

Why bitcoiners reject proof of stake

Scorecard comparing proof of work and proof of stake on who gets new coins, where attack cost comes from, concentration over time and energy use.
The trade, line by line.

  • The rich get richer by design. Staking rewards accrue to the largest holders, so concentration increases over time rather than decreasing.
  • It recreates the thing it replaced. Whoever holds the most tokens sets the rules. On Ethereum, a handful of staking providers and exchanges control a majority of stake. That is a board, not a network.
  • Nothing at stake, historically. Without an external cost, validators can cheaply support multiple chain histories; the fixes (slashing, checkpoints, "social consensus") put humans back in charge of which history is real.
  • Attack cost is internal. To attack a proof-of-stake chain you buy or borrow tokens; to attack Bitcoin you must build and power hardware the rest of the world is also building, continuously.
  • Issuance fairness. New bitcoin goes to whoever did work. New stake-coins go to whoever had coins.

The energy trade

Proof of work draws influence from outside the system; proof of stake draws it from inside.
Where the cost of influence comes from.

Proof of stake uses almost no energy. That is its one real advantage, and the cost is everything above. Bitcoiners judge that a money worth securing is worth real energy, and that a money secured by wealth is just a cap table.

Proof of Work vs. Proof of Stake · ExplainerWatch on YouTube ↗
Proof of Work's Self-Healing Properties · ExplainerWatch on YouTube ↗
MINI CHALLENGEBuy in

In proof of stake, to control a third of validation you need a third of the stake. In proof of work, what do you need a third of?

percent of hash rate
CHECK YOURSELF
1/3 In proof of stake, who has the most influence?
2/3 Where does the cost of attacking Bitcoin come from?
3/3 Which system uses almost no energy, and what does the lesson say that costs?
pick an answer for each question

SOURCES

  1. Proof-of-Work vs Proof-of-Stake (River)
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