Proof of work vs proof of stake: how blockchains agree on the truth
By SendPay Business · · 2 min read
A blockchain has no central company deciding which transactions are valid, so it needs a way for thousands of computers to agree. Proof of work and proof of stake are the two best-known ways of doing that, and they are called consensus mechanisms.
Proof of work
In proof of work, computers called miners race to solve a hard maths puzzle. The winner adds the next block of transactions and earns new coins plus fees. Cheating would mean out-computing everyone else, which costs a huge amount of electricity. Bitcoin uses proof of work.
Proof of stake
In proof of stake, validators lock up (stake) their own coins for the chance to add the next block. If they break the rules, they can lose part of their stake. It uses far less energy because there is no puzzle race. Ethereum switched from proof of work to proof of stake in September 2022, an event known as the Merge.
How they compare
- Energy: proof of work uses much more electricity.
- Who secures it: miners with hardware, or validators with staked coins.
- Rewards: mining rewards, or staking rewards.
- Track record: proof of work has run Bitcoin since 2009; proof of stake is newer at large scale.
Where SendPay fits
SendPay platforms let your customers buy, sell and hold crypto next to their cash under your brand, with assets held with regulated partners and a trading fee you set. SendPay does not offer mining or staking.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.