proof of work vs proof of stake
Cryptocurrency

Proof of Work vs. Proof of stake – which keeps your crypto transactions safer? with Ledger

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Blockchain technology is decentralized: you don’t need a middleman, like a bank, to send coins or tokens from point A to point B. That’s one of the great things about it. In a more traditional financial transaction, the intermediary provides security – but in a crypto transaction, the security comes from the blockchain itself.

There are two ways that blockchains secure transactions: proof of work and proof of stake. If you’re investing in a project, you’ll want to know which method it uses – and how that’s keeping your crypto transactions safe.

1. Proof of work (PoW)

Less than 1 min read

In PoW, miners compete to solve complex cryptographic puzzles and secure blocks of transactions on the blockchain. The first miner to prove that they’ve solved the puzzle wins new coins and the transaction fees of the block.

Miners need vast computing power to crack these challenging puzzles, and that consumes a lot of electricity. But if the puzzles were easy, the blockchain wouldn’t be as safe. To steal your crypto while a transaction is underway, an attacker needs more than half the mining power of the entire blockchain. That would allow them to override the network and reverse the transaction for their own benefit. In other words, the more mining power a PoW blockchain has, the harder it is to execute a “51% attack.”

2. Proof of stake (PoS)

Less than 1 min read

PoS doesn’t use mining or miners. Instead, validators secure transaction blocks by “staking” crypto as collateral – that is, they front their own coins to verify your transaction. This works more like a wheel of fortune than the competition setup of PoW – and it uses much less electricity. The network randomly selects a winning validator to receive new coins and the block’s transaction fees. On average, validators who stake more collateral have a higher chance of winning.

Like PoW, an attacker would need to fork out an obscene amount of money to hijack your crypto transaction – only they wouldn’t be spending it on electricity and expensive mining equipment. Rather, they’d need to front more than half the crypto of the entire staking network to override the other validators. So there’d be no point in stealing the proceeds of a single crypto transaction: the juice wouldn’t be worth the squeeze.

3. 🤩 Crypto security never looked so good

Less than 1 min read

If you’re ready to start your crypto journey, Ledger offers a secure and easy way to do just that.

There’s no better place to buy, sell, manage, and exchange them than Ledger’s all-in-one app. Combine it with their state-of-the-art hardware wallet, and you’ll discover complete control and maximum security.

Ledger gives you the keys to be your own bank, providing full control and self-custody over your assets. In addition to this Ledger continues to integrate more and more crypto coins through Ledger Live and external providers like FTX. Giving you access to interact with the blockchain ecosystem in a secure way.

Keep your digital assets safe in style: find out more on Ledger.com

4. Which is more secure?

Less than 1 min read

It’s hard to say if one method is more secure than the other. But you can think of it like this: a blockchain is safer when it costs more money, time, and resources to mount an attack (all else equal).

Take bitcoin, for example. It runs on PoW, but the total mining power (known as the “hash rate”) of the network is a lot higher than that of a smaller PoW blockchain – like, say, Litecoin. In fact, Bitcoin’s current hash rate is almost 500,000 times higher than Litecoin’s. In other words, an attacker would need a lot more computer power to hack Bitcoin than Litecoin.

It’s the same thing for PoS (all else equal): networks with more staking collateral – and more validators – are harder to attack.

Key Takeaways

  • In proof-of-work, miners secure your crypto on the blockchain by solving complex puzzles.
  • In proof-of-stake, validators secure your crypto by staking crypto as collateral.
  • A blockchain is safer when it costs more money, time, and resources to mount an attack.

This guide was produced in partnership with Ledger.

Check out Ledger’s mini-website at finimize.com.

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