One of the best features of cryptocurrency is that there is no need for a central authority like a bank to sign off on business transactions. So I can do business with someone without a massive bank or other financial behemoth looking over my shoulder. And so long as the terms of the transactions are fulfilled – whether it’s buying something with Bitcoin and executing a contract with Ethereum – the deal is done.
Driving this whole process is a network of computers with multiple copies of all the transactions – including the one I just mentioned. When everyone on the blockchain verifies these transactions, the transaction is added as a new block. The process is complete until the next transaction comes around the corner.
But here’s the rub: When I first go into crypto, I knew that people would do all this work on the blockchain because they would get paid in coins that made up the blockchain. But if you have a ton of people all doing the same work, who decides which person gets paid?
Well, there’s just two ways of getting paid if you work on a blockchain: Proof of Work and Proof of Stake. And here’s the nitty-gritty on both.
Why Do We Need Proof of Work or Proof of Stake?
The answer is pretty straightforward: To manage the issuance of new coins and to make sure people don’t cheat. Continue reading "What Is Proof Of Work And Proof Of Stake?"