Proof of Work (PoW) VS Proof of Stake (PoS)

Proof of Work requires ALL of its miners to attempt to solve a complex sum, with the winner determined by the person who has the most powerful/quantity of hardware devices.

Proof of Stake model randomly chooses the winner based on the amount they have staked.

Why is Proof of Stake better than Proof of Work?

The model of Proof of Stake is a much better model than Proof of Work because it solves many problems. Some reasons are explained below to understand the same

Centralization

If you know about Proof of Work VS Proof of Stake up to this point, you might remember that Proof of Work blockchains give people who purchase powerful hardware devices a greater chance of winning the mining reward.

What this has resulted in is centralized organizations buying thousands of devices (known as ASICs) which generate the highest mining power. This type of operation is known as a 'mining pool' and it allows people to 'pool' their resources together to give them the greatest chance of solving the cryptographic sum first.

Cryptocurrency Mining

Consequently, more than 50 percent of the total Bitcoin mining power is controlled by just four mining pools (of which the majority are located in China where electricity is cheap).

This is an unfair system as it means that there is no chance of ever winning the mining reward for the average person. This is where the evidence of involvement is different. This model stops groups of individuals from joining forces to dominate the network just to make a profit. Instead, those who contribute to the network are rewarded in proportion to the amount they have invested by freezing their coins.

Electricity Consumption

Proof of Work blockchains like Bitcoin uses large amounts of electricity. This is because the cryptographic sum that miners must solve is incredibly difficult.

A recent study found that the total amount of electricity needed to maintain the function of the Bitcoin network is more than the amount used by more than 159 different countries!

This is not only bad for the environment, but it also slows down the rate at which their real-world adoption can be increased by cryptocurrencies. This is because it is necessary to pay electricity bills using fiat currency!​

On the other hand, Proof of Stake does not need highly complex sums to be solved, meaning that the electricity costs to verify transactions are substantially lower.

51% Attack

A 51 percent attack is used to describe the unfortunate event that more than 50 percent of the total mining power is gained by a group or single individual. It would allow the individual to make changes to a specific block if that happened in a Proof of Work blockchain such as Bitcoin. If this individual was a criminal, the block could be altered for their gain.

A recent example of a 51 percent attack occurred against the blockchain Verge, which allowed the hacker with 35 million XVG coins to walk away. This amounted to a real-world value of $1.75 million at the time of the attack!

It wouldn't make financial sense to attempt to perform a 51 percent attack when using a Proof of Stake consensus mechanism. The bad actor would need to invest at least 51 percent of the total amount of cryptocurrency in circulation in order for this to be accomplished. The only way for them to do this is to buy coins on the open market.

If they decided to buy such a substantial amount, then the coin's real-world value would increase along the way. As a consequence, they would end up spending considerably more than they could gain from the attack. Not only this but once the rest of the network realized what had happened, all of their stakes would be lost by the bad actor!