A blockchain has no central authority keeping the ledger, so who decides what the next block is, and how do we prevent someone from altering the ledger? These are the questions that consensus mechanisms answer. The two most common are Proof of Work (PoW), used by Bitcoin, and Proof of Stake (PoS), currently used by Ethereum.

Corresponding coin: $BTC quote 77,126.98 (24h -1.27%).

■ Proof of Work: A Race for Computing Power

Bitcoin uses Proof of Work: Miners repeatedly try to calculate SHA-256 hashes. The first to find a result that meets the difficulty requirement earns the right to add the next block to the ledger and receive the block reward.

Bitcoin produces a block roughly every 10 minutes. Mining difficulty adjusts every 2,016 blocks: when the network’s total computing power increases, the difficulty rises accordingly, bringing block times back to around 10 minutes.

■ Proof of Stake: putting up staked assets as collateral

In September 2022, Ethereum switched from Proof of Work to Proof of Stake through “The Merge.” Running a validator requires staking at least 32 ETH. Validators take turns proposing and attesting to blocks according to the protocol rules.

Under Ethereum’s Proof of Stake, each slot lasts 12 seconds, and at most one block can be produced per slot. Validators who act maliciously have some of their stake slashed, while those offline for an extended period also have some of their balance deducted.

■ What keeps it secure?

Proof of Work relies on substantial investments in computing power and electricity. To rewrite the historical record, you’d need to control most of the network’s computing power, which comes at an extremely high cost.

Proof of Stake uses staked assets as collateral: to attack the network, you’d need to control a large amount of stake, and if your malicious behavior is detected, that stake will be slashed. Both mechanisms make “the cost of acting maliciously far greater than the potential gain”—they just put different things at stake.

■ Don’t compare consensus mechanisms alone

When discussing which chain is more secure, consensus mechanisms are only part of the picture. How widely nodes and validators are distributed, the quality of client software, and how the community responds when problems arise are just as important.

■ A few final words

Once you understand PoW and PoS, terms like “hash power,” “staking,” and “slashing” will make sense in the context of the system as a whole. Only invest what you can afford, and make sure you have a way out.

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