What are Proof-of-Work (POW) and Proof-of-Stake (POS) in Cryptocurrencies?

The three words you will definitely come across as soon as you start learning about cryptocurrencies are distributed ledgers, blockchain, and consensus algorithms.

The good thing is that these vocally confusing words refer to concepts that will be explained in this short guide, and by the end, you will learn how to leverage this technology to make money online with cryptocurrencies.

Distributed ledgers have no central server. They constitute a network of geographically distributed servers, with each storing the exact copy of the information in the network and updating in real-time.

For most blockchain networks, they validate transactions and reach a consensus across the network by using either the Proof of Work or Proof of Stake algorithms. These are lines of code that automatically complete a transaction once all the pre-established conditions for the transactions are met.

Proof of Work and Proof of Stake: Miners and Stakers

Proof of Work

The PoW consensus is the pioneering consensus in blockchain technology. Miners in a Proof of Work network use this consensus to verify transactions and add new blocks to the blockchain network as well as securing it.

They use computers with high computational power and high energy consumption to solve complex mathematical puzzles, for instance, in the Bitcoin network. The first miner to validate a transaction is rewarded with newly generated Bitcoins.

The complexity of the mathematical puzzles increases with an increase in the number of transactions, miners, and energy consumption. This means that as the network grows, it will need more powerful nodes to verify transactions and higher energy consumption.

After a while, it might become harder to afford mining gear and energy costs, as lower computing power nodes decrease the chances of verifying transactions faster than others in the network with more powerful nodes.

Such limitations are among others to do with scalability and network transaction speeds, making blockchain developers explore an alternative way to verify transactions in a blockchain network.

Proof of Stake

Proof of Stake is very different from PoW. Staking involves locking a specific amount of cryptocurrency assets or coins in a blockchain network. This enables you to take part in verifying transactions, creating new blocks, and securing the network.

The network randomly chooses who will validate a block according to the number of their staked coins. Instead of just holding the coins, or solving complex puzzles like in PoW, stakers join a pool of other stakers from which the network randomly selects transaction validators.

This random selection process secures the network by preventing a few number of people from exploiting it with their verification rights. Instead of collecting block rewards like in PoW consensus, stakers rewards are network fees.

The percentage profit in returns for staking coins incentivizes more stakers to join the network and stake their coins. The more you stake, the higher your probability is, to produce the subsequent block.

The PoS consensus is environmentally friendly, unlike the PoW system, which consumes a lot of electric power and generates a lot of heat.

The first PoS coin, known as Peercoin, was developed in 2012 as a way to increase the scalability of a Bitcoin network and reduce operating costs. The PoS system has more potential to attract more stakers than PoW, which usually requires medium to advanced programming language knowledge.

Advantages of PoS and How You Can Start Making Money by Becoming A Staker

POS has advantages for both the blockchain network and the stakers. Here are key advantages of a staking consensus that you can leverage to start making money online with cryptocurrencies.

1. Staking Is Way More Affordable Than Mining

Staking doesn't require much computing power or energy consumption to take part in block validation and approval. This makes it easier to set up your staking operation, which might only need a cryptocurrency wallet and some coins.

Still, staking involves some knowledge on how to run your staking wallet, choose and manage your staking coins, and this can be an involved process.

Many developers have realized the potential of staking to attract more people's attention to cryptocurrency investments. Tailor-made solutions for passive earners have been made to help simplify staking by eliminating software, hardware, and information hurdles, especially for new beginners.

One of the best platforms you can start staking and earning with minimum effort is MyCointainer, which offers a wide variety of PoS coins and other exciting opportunities to earn more with cryptocurrencies.

You can start staking with any minimum or maximum deposit and earn a percentage profit. MyCointainer presents a great way to take advantage of the opportunities present in cryptocurrency investments. Staking helps the network to grow and be secure, and as it grows, your rate of return on investments also increases.

2. Your Investment as A Staker Is Safe

The concept of staking protects the network from malicious attacks or people trying to validate the same block twice and thus manipulating the network.

Your investment will remain safe and will also earn you a profit as long as the network is validating transactions. Anyone who proves to be a bad seed is detected and invalidated by the network.

Additionally, since the blockchain network is decentralized, an attempt to hack the network would prove expensive as the hacker(s) would need to stake more and more coins to get a better chance to validate blocks. This infrastructure design discourages malicious attacks by making hacking expensive for hackers.

3. Easier To Attract More Stake-holders

The general population does not easily understand the concept of cryptocurrencies. People tend to shy away from concepts they don't understand, especially when it comes to backing their confidence with their money.

Staking has been simplified, especially for investors who only need to back up a project by staking their coins. More investors mean more stakers for the network, which is a good thing. This expands the staking pool, raising the value of the cryptocurrency and ensuring more rewards and profits for the investor.

Besides, MyCointainer provides you with a single crypto wallet with which you can stake as many coins as you want from its long listing of PoS coins and expand your portfolio and earnings.

4. Wide Range Of Staking Opportunities

Many blockchain projects have realized the value of the PoS consensus algorithms and are increasingly developing blockchain networks using this algorithm. Some of these projects have very strong use cases, and as the coin value appreciates, so make your profits as a staker.

The blockchain industry is still in its early stages, which presents a unique opportunity to present investors. Whereas PoW miners incur continuous hardware and electricity costs, staking needs more coins to boost your investment returns, which is a more futuristic viable option.

Bottomline

Conclusively, you lose nothing by buying and holding coins and getting earlier into a project will not only help you earn more but will inspire your decision to research further about crypto opportunities.

You can make money passively through staking. MyCointainer is well placed as a gateway to the cryptoverse, and it demonstrates how easy and safe it is to earn money from cryptocurrencies.