Crypto

PoW and PoS

These are two ways a blockchain decides who adds the next block. In Proof of Work (PoW), miners compete with computing power. In Proof of Stake (PoS), validators who locked their coins as collateral confirm the blocks.

If a validator approves an invalid block, part of the collateral is taken away. Ethereum moved from PoW to PoS in September 2022 (The Merge), while Bitcoin stays on PoW.

Example

Bitcoin gets its protection from miners doing work: rewriting history is expensive. A PoS network protects itself differently: a dishonest validator has something to lose, because the collateral can be cut.

What not to do

Do not mix up staking on an exchange with running a validator. On an exchange you hand your coins to a service, and the risks are different.

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