Proof of Work vs. Proof of Stake

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If you've researched blockchain, you've probably heard of Proof of Work. It's a popular way for blockchains to keep consensus among their members. But there are a lot of drawbacks to Proof of Work, so many developers are working on an alternative!

In this video, we go over what Proof of Work is, and what some of it's problems are. We'll then go over Ethereum's future solution called Proof of Stake, and what it does differently.

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Proof of Work vs Proof of Stake: Conclusion
Thanks to a PoS system validators do not have to use their computing power because the only factors that influence their chances are the total number of their own coins and current complexity of the network.

So this possible future switch from PoW to PoS may provide the following benefits:

Energy savings;

A safer network as attacks become more expensive: if a hacker would like to buy 51% of the total number of coins, the market reacts by fast price appreciation.

This way, CASPER will be a security deposit protocol that relies on an economic consensus system. Nodes (or the validators) must pay a security deposit in order to be part of the consensus thanks to the new blocks creation. Casper protocol will determine the specific amount of rewards received by the validators thanks to its control over security deposits.

If one validator creates an “invalid” block, his security deposit will be deleted, as well as his privilege to be part of the network consensus.

In other words, the Casper security system is based on something like bets. In a PoS-based system, bets are the transactions that, according to the consensus rules, will reward their validator with a money prize together with each chain that the validator has bet on.

So, Casper is based on the idea that validators will bet according to the others’ bets and leave positive feedbacks that are able accelerates consensus.