Proof of Work vs. Proof of Stake

Crypto currencies are “mined” by people with computer power to spare. That game is changing.

Presently, miners add up all the pending transactions and look for the unknown number that will bind together all the new transactions with the last prior block of transactions and – when hashed – create a hash number with, effectively, a certain number of leading zeros.   Guess at passwords until the hash comes out as “00000….” except the real answer requires a lot more zeros ..I think they’re up to 13 or 14 now.   If your computer finds the correct number, then you get paid a crypto cash token to your account number.

More recently people are becoming “Earth conscious”. The movement has forced many companies and associations to save energy. Running many trillions of CPU cycles chopping away at the next Bitcoin secret token takes a LOT of electric energy. With so much “wasted” power (all but one computer does ~not~ find the correct hash code), some blockchains are changing their method.  A tangential benefit of change might be that the big server farms are not needed. For example, did you hear that Bitcoin lost ~20% of its network mining when China had a power outage?

Finding the secret number to create certain hashes is called “Proof of Work”. Your computer works hard. You get paid.

Now, the new method is called “Proof of Stake”.   In this way, you can throw your computer into the pool, proportional to how many tokens you own. In other words, your stake in the system. Then the network pool randomly selects a winner, and only that winner calculates the new (not very difficult to find) hash code to secure the new block.   Power dissipation across the globe goes down orders of magnitude and we’ve all done our job saving the planet.

Personally, this new method seems to be a kinder, gentler, method akin to Socialism or Lotteries vs. Capitalism. Before it was competition with waste. Now it will switch to cooperation and efficiency.  Hmm….   Is getting along and normalizing bestowed gifts from the System a better way than striving and working?  The waste of Capitalism has long been a critique from Marxists.  If you prove you have a stake in the system (you own tokens, hence the name “proof of stake”), you wouldn’t introduce false transactions onto the network grid would you? You wouldn’t destroy the society that gives you the gifts would you?  Why would anybody destroy the reputation of a certain blockchain if it destroys their own stake at the same time? We all trust each other, right?