- How proof of work uses miners and hashing
- How proof of stake uses validators and staked ETH
- Proof of work vs proof of stake compared
- Energy use and Ethereum's switch to proof of stake
- Security trade-offs in proof of work and proof of stake
- What these consensus mechanisms mean for everyday users
- Writing about mining, staking and validators
- Frequently asked questions
The difference in proof of work vs proof of stake is how a blockchain picks who adds the next block. Proof of work uses miners who compete with computing power, as Bitcoin does. Proof of stake uses validators who lock up coins as collateral, as Ethereum has since The Merge, using far less energy.
Every public blockchain has the same puzzle to solve: thousands of computers that don't know or trust each other need to agree on which transactions happened, and in what order. The rules they use to reach that agreement are called a consensus mechanism. Proof of work and proof of stake are the two you'll hear about most, mainly because Bitcoin uses one and Ethereum moved from one to the other.
I've based this explainer on ethereum.org's developer documentation for both mechanisms, its page on The Merge and bitcoin.org's description of mining. It's here to explain how the systems work, not to suggest buying, staking or holding anything, and it isn't financial advice.
How proof of work uses miners and hashing
In proof of work, computers called miners compete to add the next block. ethereum.org describes the core task: miners repeatedly run data through a hashing function, searching by trial and error for a value called a nonce that produces a result below a target. The target is set by the network's difficulty, and a lower target means fewer valid answers, so finding one takes a lot of computing effort.
- The winning miner adds the block and receives a reward set by the protocol.
- Everyone else can check the answer instantly, even though finding it was hard.
- Changing an old transaction would change its hash and break every block after it, so tampering is easy to spot.
- Nodes treat the chain with the most work behind it as the correct one.
bitcoin.org describes Bitcoin mining as a distributed consensus system used to confirm pending transactions, and compares it to a competitive lottery that makes it hard for any one participant to keep adding blocks in a row.
How proof of stake uses validators and staked ETH
Proof of stake swaps computing power for collateral. On Ethereum, according to ethereum.org, anyone who wants to run a validator deposits 32 ETH into a deposit contract and runs three pieces of software: an execution client, a consensus client and a validator client. Time is split into 12-second slots, grouped into epochs of 32 slots.
- In each slot, one validator is chosen to propose a block.
- Committees of other validators attest that the block is valid.
- Every active validator attests once per epoch.
- When checkpoint votes represent at least two-thirds of all staked ETH, earlier blocks become finalised.
Validators who break the rules, for example by proposing two blocks in one slot or sending contradictory votes, can be slashed. ethereum.org explains that a single slashed validator loses a small part of its stake, while a mass slashing event can destroy all of it. ethereum.org also notes that staking pools let people take part without the full 32 ETH.
Proof of work vs proof of stake compared
| Feature | Proof of work | Proof of stake |
|---|---|---|
| Who adds blocks | Miners competing with computing power | Validators chosen to propose, with others attesting |
| What's at risk for cheats | The electricity and hardware spent on mining | Their staked ETH, which can be slashed |
| Finality | Grows more certain as blocks are added on top | Blocks are explicitly finalised by validator votes |
| Energy use | High, because of the mining competition | Much lower, according to ethereum.org |
| Main example | Bitcoin, and Ethereum before The Merge | Ethereum since The Merge |
Energy use and Ethereum's switch to proof of stake
Energy is the difference most people have heard about. ethereum.org says that shortly before Ethereum's switch, its miners used roughly 70 TWh of electricity a year, about the annual consumption of the Czech Republic, citing Digiconomist.
Ethereum moved to proof of stake in an upgrade called The Merge. ethereum.org gives the date as 15 September in 2022 and estimates that the change cut Ethereum's energy consumption by around 99.95%. Bitcoin still uses proof of work.
Proof of stake also changed the hardware question. ethereum.org points out that validators don't need specialist mining equipment to propose blocks, which lowers the barrier to taking part.
Security trade-offs in proof of work and proof of stake
Both systems try to make attacks more trouble than they're worth, but they do it differently.
- Proof of work: ethereum.org explains that an attacker would need more than half of the network's mining power to keep producing fraudulent but valid blocks, and the computing effort required could outweigh anything they'd gain. Under proof of work, the chance of a block being reversed shrinks with every new block but, as ethereum.org puts it, never quite reaches zero.
- Proof of stake: reverting a finalised block would require an attacker to lose at least one third of all staked ETH, according to ethereum.org. If the chain stops finalising for more than four epochs, an inactivity leak gradually drains stake from validators who aren't voting with the majority.
- Drawbacks of proof of stake: ethereum.org lists that it's younger and less battle-tested than proof of work, more complex to build, and asks validators to run three pieces of software.
What these consensus mechanisms mean for everyday users
If you're simply sending or receiving coins, you won't notice the consensus mechanism much. It works in the background to decide when your transaction is settled on the chain. What it does shape is how a network handles energy, who can take part in securing it and how final a transaction becomes.
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The same network also runs programs. On Ethereum, consensus is what lets everyone agree on the results of smart contracts, the code that runs tokens and decentralised apps. And whichever mechanism a chain uses, your own access still depends on your wallet keys, so it's worth understanding how a seed phrase protects a wallet too.
Cryptoassets are high risk, and the FCA warns that people who invest should be prepared to lose all their money. Understanding the technology is useful whether or not you ever hold any.
Writing about mining, staking and validators
Consensus mechanisms are often explained badly, either buried in jargon or reduced to slogans. If you can explain mining, validators and finality clearly, there are publications looking for that kind of writing.
For developers and analysts who'd like to publish on consensus topics, I've gathered blockchain publications that accept contributed articles.
Frequently asked questions
Does Bitcoin use proof of stake?
No. Bitcoin uses mining, which is proof of work. bitcoin.org describes mining as the distributed consensus system that confirms transactions by adding them to the blockchain.
When did Ethereum stop using proof of work?
ethereum.org dates The Merge, Ethereum's move to proof of stake, to 15 September in 2022.
How much ETH do you need to run a validator?
ethereum.org says running your own validator requires depositing 32 ETH. Staking pools let people take part with less, but that's a separate arrangement with its own risks.
What is slashing in proof of stake?
Slashing is a penalty for validators who break the rules, such as proposing two blocks in one slot. Part or, in a mass event, all of their staked ETH can be destroyed.
Which consensus mechanism uses less energy?
Proof of stake. ethereum.org estimates The Merge cut Ethereum's energy consumption by around 99.95%, because it removed the mining competition.
