If you're new to crypto, it can be confusing hearing about Proof-of-Work (PoW) and Proof-of-Stake (PoS). What does it mean, why does it matter anyway ?! I'll explain it to you as simply as I can ! Thanks to u/TheHoodOG for the post idea !

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What is it ?!

As you know, one of the goal of cryptocurrency is decentralization, meaning it's not controlled by a singular entity (like the US Dollar is controlled by the US Government). To achieve that, we need people around the world helping with decentralizing the network. And there's no way people are going to do anything if they're not rewarded for the effort, right ?!

We need everyone to work together and agree with each other, that's why PoW and PoS are what we call consensus mechanism. It's the way of keeping everyone on the same page, it's how we validate the transactions on a blockchain basically.

Proof-of-Work

You probably already heard about crypto miners ?! Well, they are the founding blocks of the PoW mechanism. The Work is made by miners, they are the one validating the transactions, they are creating new BTC blocks by mining it, if you want to look at it that way. In exchange for their work, they are rewarded a fixed amount of Bitcoin. That's the incentive, that's how we get people on board with securing the network and its decentralization !

PoW is the first consensus mechanism ever created, it was invented by Satoshi Nakamoto : Bitcoin is a Proof of Work crypto !

If you want to understand how mining works in detail, there's a lot of good videos on Youtube about it

Pros :

• We know it works well ! Bitcoin is Proof of Work, and it works fine
• The transactions are validated in a complete decentralized manner
• To be able to "hack" it, it would require so much hardware that it'll never be profitable

Cons :

• It needs a lot of energy ! Bitcoin consumes around 127 Terawatt hours, it's more than several countries !!
• The more expensive mining gets, the more centralized it can become. Corporations could own too much of the network in the future if solo and pool mining dies
• Pool mining can be a problem of its own, if everybody is mining on the same pool, it's just centralizing the Work
• Nowadays you'll probably need to buy a crypto miner to be profitable. In the past, you could mine Bitcoin with your home computer ! You can still mine with your home computer, Monero is still CPU minable for example

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Proof-of-Stake

You probably heard about Staking, I even made a Guide about it ! There are no miners in a PoS mechanism, that's why you can't mine ETH directly anymore ! Instead, the transactions are validated by people who stake their ETH. If you have ETH, you stake it and you'll become a "Validator". Every validator is rewarded in exchange of helping securing the network, when you pay gas fees some of them are going to those validators. The rewards are split evenly depending on the amount staked

The Validators are the ones creating the blocks and validating the transactions !

Pros :

• It doesn't use a lot of energy, especially compared to PoW
• Better scalability
• People can have self-custody of the token they're staking !

Cons :

• The mechanism is still evolving, we don't know how it could react in crisis scenario for example
• Can be less secure than PoW
• If the coins are not well distributed among owners, it would lead to centralization by the richest. You wouldn't need computational power, just money to become the most powerful Validator. It's not really an issue for a project with a huge market cap, but can be for a micro-cap PoS token !

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TL;DR :

PoW works with Miners, the emphasis is on security and decentralization

PoS works with Validators, the emphasis is on energy efficiency and scalability