Proof of Stake VS Proof of Work
What is Proof of Stake (POS) and what is Proof of Work (POW)? In the simplest of terms both are different types of computer algorithms.
Proof of Work is a system where the probability of mining the next block in the blockchain solely depends on the amount of work completed by the miner. This is what the originator, Bitcoin uses to mine all of its new coins, as well as it's smaller counterpart, Litecoin. However there is one major drawback regarding the POW method, it requires an abundance of computing power. The reason behind needing so much computing power is to protect against spammers and to keep the systems running without issues. The amount if power used to confirm one Bitcoin transaction has been compared to how much energy it takes to power your house for an entire week!
As you can see this is an extreme wasteful method for mining and must be changed to ensure the longevity of mining in the future.
The Proof of Stake method rewards token holders with transaction fees in return for validating transactions; where each validator owns some stake in the network. The amount of coins owned by a given miner directly related to how much mining power they have. This can lead to some current issues with the POS method. The main issue being, that if a small group of people own the majority of tokens they will be the validators. This issue will only be temporary as the system is still evolving and as time progresses the networks should become more solid and prosperous. Ethereum plans to make the switch to Proof of Stake with their hard fork, Casper. The POW method is a more energy friendly option that does not require a significant amount of computing power. Although less power is being used, this method has extremely quicker transaction times. All that a miner would have to do is ensure that their computer is online. Proof of Stake also provided an incentive for people to hold onto their coins for the long-term as they will have more power in the network the more they acquire.
I believe Proof of Stake is the way of the cryptocurrency future. Let me know your thoughts about these different mining methods.
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Best of luck in your investments!
-Blayzincrypto