Proof of Work (PoW) and Proof of Stake (PoS) serve as the primary consensus mechanisms adopted by major cryptocurrencies to secure their networks.
In the case of Proof of Work, Bitcoin utilizes this mechanism to validate transactions and ensure network security, with one of its primary functions being the prevention of double-spending. Miners, the network participants, compete with computational power to confirm new blocks and update the blockchain. Successful miners are rewarded with BTC, receiving a block reward of 6.25 BTC plus transaction fees upon successfully mining a Bitcoin block.
Contrasting PoW, Proof of Stake differs in how it determines the validator of a block. PoS has gained popularity as an alternative consensus mechanism aimed at addressing some of the limitations of PoW, such as scalability issues and energy consumption. Validators, the participants in PoS, do not require powerful hardware to compete for block validation. Instead, they stake (lock) the native cryptocurrency of the blockchain. The network selects a validator based on the amount of crypto staked, with the chosen validator receiving a portion of the transaction fees from the validated block. The higher the amount of coins staked, the greater the chances of being selected as a validator.
PoW is not only used in Bitcoin but also in other prominent cryptocurrencies like Ethereum (ETH) and Litecoin (LTC). On the other hand, PoS is employed by altcoins such as Binance Coin (BNB), Solana (SOL), Cardano (ADA), and more. It’s worth noting that Ethereum has plans to transition from PoW to PoS in 2022, indicating a shift in its consensus mechanism.
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