Proof Of Work Vs. Proof Of Stake
The two proofs above are types of blockchain protocols. My one-sentence explanation for blockchains:
- Block = verified transactions
- Chain = blocks linked together
Blockchain is a network ledger that shows a record of valid transactions–verified by the protocol.
Proof of Work and Proof of Stake protocols confirm the transactions on a blockchain.
- Bitcoin's protocol = Proof of Work
- Ethereum's protocol = Proof of Stake
Proof Of Work
Transactions are verified by "miners". They solve complex puzzles and math equations from their computer.
Solving problems earn the right to add a block to the chain. The first person to add transactions to the blockchain earns rewards like bitcoin. That's what it means to "mine" bitcoin.
Proof Of Stake
Transactions are verified by "validators". They don’t use hardware to solve complex mathematical puzzles. You verify through token ownership.
Validators lock up their crypto as collateral for the right to verify transactions. They "stake" their coins. Validators collect transaction fees as rewards. They're picked randomly since there's no mining involved.
The above is just a quick summary of what I understand so far. It's an oversimplification, but I don't write like a textbook author.