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Proof-of-Work vs. Proof-of-stake: The Best For Scaling Blockchains



Proof-of-Work vs. Proof-of-stake

Proof-Of Work vs. Proof-of-stake: The Best For Scaling Blockchains

Proof-of-Work vs. Proof-of-Stake

If you want to know more about Proof-of-Work vs. Proof-of-Stake, this post offers great insight. Between proof-of-work and proof-of-stake, which one is the best for scaling blockchain systems? We will answer this question and more in this article. Over the years, scaling has been a big issue for cryptocurrency transactions. In the cryptocurrency world, network validation often comes in two forms; proof-of-stake or proof-of-stake. Although there are many others, these two are very common and power the popular blockchain systems.

Also Read: How to Store Your Bitcoin and Keep it Safe

These two processes solve the problem of “verifying transaction” but with different approaches. Both approaches offer different solutions to the problem of cryptocurrency scaling. Does one process have an advantage over the other, or are they just different ways of doing the same thing?

Both of these cryptocurrency transaction validation processes are called consensus mechanisms. They are required to confirm transactions that take place on the blockchain without the need for an intermediary. By the end of this article on Proof-of-work VS Proof-of-Stake, you will perfectly understand each of these consensus mechanisms. We will start with the basics of each model and how one differs from the other.

The Basics of Proof-of-Work vs. Proof-of-Stake

In his bid to develop the first cryptocurrency, Bitcoin, Satoshi Nakamoto has to find a way to verify transactions without intermediaries. He achieved it when he created the Proof-of-Work consensus mechanism. The essence of the Proof-of-work system is to determine how blockchain reaches consensus.

Proof-of-Work system is based on an advanced form of mathematics known as cryptography. It is on this basis that digital coins like Bitcoin, Ethereum, Litecoin, etc. are called cryptocurrencies. Cryptography uses advanced mathematics that only powerful computers can solve. No two of these mathematical equations are ever the same. This means that once the problem is solved, the network knows that the transaction is genuine and authentic.

Many blockchain systems copied the original Bitcoin code; hence they also use the Proof-of-Work consensus model. Although the Proof-of-Work consensus protocol is great, it has its shortcomings. It needs a significant amount of electricity, and it also has a limited number of transactions per second. These shortfalls of Proof-of-Work lead to the creation of other consensus mechanisms. One of these consensus mechanisms created to solve the problem of Proof-of-Work is the Proof-of-Stake consensus mechanism.

Scott Nadal and Sunny King both developed the Proof-of-Stake model in 2012. At the time of the launch, both developers argued that the Proof-of-Work model of Bitcoin requires the equivalent of $150,000 daily electricity cost. Interestingly, the figure has increased to millions of dollars currently. Peercoin was the first blockchain project to adopt the Proof-o-Stake consensus mechanism. The initial benefits were an equal mining system, better scalable transactions, and less reliance on electricity.

Now that you have known the basics of Proof-of-Work VS Proof-of-Stake, we go further to explore the adoption of these consensus mechanisms.

The Adoption of Proof-of-Work VS Proof-of-Stake

Bitcoin blockchain was the first to adopt the Proof-of-Work (PoW) consensus protocol. The PoW network takes about ten minutes to confirm a transaction and can handle about 7 transactions per second. This has increased the transaction fees from the time the project started in 2009. The initial Bitcoin transaction fee was a fraction of a cent. However, during the busiest period of December 2017, the fee increased to $40 per transaction.

Although Bitcoin transaction fees have been reduced, they are still too high to serve as a suitable global payment system. The limitations of the Prof-of-Work consensus mechanism is the precursor of these issues. Ethereum is the second most popular cryptocurrency, and like Bitcoin, it uses a Proof-of-Work consensus mechanism. However, the developers of Ethereum made a few changes to the original code. These changes enabled the network to process transactions in about 16 seconds. Although this is not the fastest in the crypto space, it is far better than the 10 minutes it takes Bitcoin.

Also Related: What is Lightning Network and how does it work?

Meanwhile, the scalability issues of Proof-of-Work haven’t been solved. The Ethereum blockchain processes a maximum of 15 transactions in a second. This is substantially lower than what the network needs. Ethereum’s Proof-of-Stake launch date isn’t yet official, but it has the potential to increase the number of transactions to thousands per second. Other blockchains like Bitcoin Cash and Litecoin have also installed the Proof-of-Work consensus mechanism. Meanwhile, cryptocurrencies like Dash use the Proof-of-Stake model, which allows them to send and receive funds in seconds.

NEO is another popular blockchain that uses the Proof-of-Stake model, and it has had a great journey since it was launched in 2016. The adoption of the Proof-of-Stake model by NEO increased its value to more than 100,000%.

Proof-of-Work VS Proof-of-Stake Energy Consumption 

When we talk about Proof-of-Work VS Proof-of-Stake, one of the major discussion points is the energy consumption difference. In Proof-of-Stake (PoS), energy consumption is minimal compared to Proof-of-Work (PoW). In PoW, miners have to solve complex mathematical puzzles that are computationally intensive. It means that their hardware uses lots of electrical power to solve these computational problems.

On the other hand, PoS depend on little electrical power to run. Considering the bright future of cryptocurrency, PoS will be good for the environment. It means that the more we use PoW, the energy consumption will also grow.

The Security of Proof-of-Work VS Proof-of-Stake

In more than one decade of Bitcoin’s existence, Proof-of-Work is yet to fail. It has shown its resilience over the years. Meanwhile, PoS is undoubtedly a great idea, but it isn’t yet tested like PoW. This is not good, especially when peoples’ money is on the line.

Another big security worry for Proof-of-Stake is the outcome of cases of disagreement between members of the community. When blockchain splits or forks result from a disagreement between community members, PoW miners will have to decide where to direct their mining power. They will have to choose between the newly forked blockchain or the original blockchain.

For these PoW miners, splitting their mining power is uneconomical as it will reduce their chances of mining crypto on either of the two chains. This will discourage constant forking by users who want to go after newly created money to the detriment of the network’s integrity.

On the other hand, Proof-of-Stake allows validators to validate the transactions f both chains resulting from a fork. Validators can do this without consequences since PoS doesn’t take additional resources like mining power. It means that users can create multiple forked cryptos using the PoS consensus mechanism. Users can “double spend” crypto or even spend the same unit of cryptocurrency twice.

They can do this by spending it on one blockchain and then forking or splitting from the old blockchain to create a new one where the spending transaction does not exist. However, solutions like lashing or confiscating of stake for bad behavior have been proposed to tackle the “nothing at stake” problem.

In the case of a malicious attack like the 51% attack, Proof-of-Stake may be more secure than PoW. It will be more expensive for attackers to execute the 51% attack on PoS. Meanwhile, an attacker will have to buy lots of mining equipment before attacking the PoW system, and it will be expensive. However, it will be more expensive to buy 51% of a PoS crypto’s outstanding currency. The reason is that buying that much will drastically increase the price as a purchase is being made. Every purchase pushes the price higher and higher. Also, buying that amount of crypto from different parties will be close to impossible.


Some people have the opinion that one of these consensus mechanisms is better than the other. However, it is difficult to reach a consensus for Proof-of-Work VS Poof-of-Stake. PoS may seem to be the better one when we look at energy consumption. Meanwhile, PoW has been in use for more than a decade, unlike PoS.

On the other hand, there might be other advantages and disadvantages of these two consensus mechanisms that we are yet to think about. At the moment, it will be safe to say that Proof-of-Stake is another interesting development in the rapidly evolving blockchain space. With time, we will see where it leads and its impact on the broader blockchain ecosystem.




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What is Cryptocurrency And How Does It Work? 



Obiex finance website

Cryptocurrencies are decentralized digital assets that operate on blockchain technology that in turn operates by storing a ledger of every transaction on all nodes powering the blockchain. 

In layman’s terms, blockchain technology is like a record keeper, it collects data (in blocks) and links one block of data to another, forming a chain. The data on the blockchain is open for all to see and cannot be easily altered. Blockchain technology can be used for a variety of use cases besides cryptocurrency, ranging from voting to crowdfunding, keeping health records, etc.

Using Bitcoin as an example, nodes are computers connected to the network to mine Bitcoin,  – this collection of independent nodes working together is what makes the network decentralized.

The decentralized nature of cryptocurrency is down to the creators recognizing flaws in traditional banking & financial systems like governments and financial institutions acting only in their best interests and not in the best interest of the common man, leading Satoshi Nakamoto (the creator of bitcoin and blockchain technology) to take steps to rectify that.

Related: What are NFTs?

To make cryptocurrency transactions, you will need to have a set of both public and private keys that will act as passwords protecting your crypto wallet. 

The Public key is connected to your wallet address, allowing you to share the address with others to receive cryptocurrency, while the private key is known to only you and is what you will use to approve outgoing crypto transactions from your wallet. 

Trading Cryptocurrency on Obiex

Obiex finance website

With the popularity of cryptocurrency trading currently at an all-time high, the biggest challenge for many rookie traders is selecting which cryptocurrency exchange to trade on.

If you fall in this category, the immediate priority should be finding an exchange that allows rookie traders to make trades easily, doesn’t charge extra fees and is completely secure. That exchange is Obiex Finance.

In this guide, you will be shown how to navigate the Obiex mobile app & website easily and what to do to get started with making cryptocurrency trades. 

Getting started with Obiex Finance 

Obiex Finance is a digital asset exchange and financial technology (Fintech) platform that gives its users the ability to easily execute cryptocurrency trades from anywhere regardless of their skill level.

Their commitment to ensuring that users get the best experience is shown in how they allow instant swaps from volatile coins like Bitcoin to stable coins like USDT, and vice versa, without confirmations. In a market where the value of crypto can fluctuate wildly, this feature is especially valuable as it allows users to seamlessly switch between making profits to saving those profits in a more stable currency before the value drops.  

To create an Obiex Finance account, simply head over to their homepage, click on “sign up”, fill in the required fields and verify your email address. After that, create wallet addresses for your crypto assets and you’re ready to start trading!

The cryptocurrency available for trading on the Obiex Finance platform are: Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Polygon (MATIC), Dogecoin (DOGE), Tether (USDT), Binance USD (BUSD), and USD Coin (USDC).

Getting Started with Cryptocurrency trading

After creating your Obiex account, you need to follow these simple steps:

  1.     Have a Trading Strategy: Trading cryptocurrency without having a strategy in place is the easiest way to lose your money. You will need to research the various crypto trading strategies thoroughly and choose the one that best suits your needs and temperament. For example, if you’re a patient person who is content to make smaller, safer trades over a long period of time instead of making riskier trades, then scalp trading is the best trading strategy for you. There are also other crypto trading strategies such as Swing trading, position trading, Arbitrage, dollar cost averaging etc.
  2.     Pick the cryptocurrency you’d like to trade: There are several cryptocurrencies available on Obiex Finance such as Bitcoin, Ethereum, Binance Coin, Tether etc. Selecting which cryptocurrency to trade is usually down to making a choice; whether to stick with the safer, more established cryptocurrencies like Bitcoin or to go with the more volatile coins that have a high upside and an equally high-risk factor like the Dogecoin which can move in either direction based on what Elon Musk tweets.

It is also important to note that when you pick a cryptocurrency to trade, it would be wise to ensure that the cryptocurrency matches the strategy you pick. For example, if your preferred strategy is patient scalp trading, then investing in volatile coins that have a high upside but carry a lot of risk is not the wisest move. 

To swap crypto on Obiex Finance, add the wallet of crypto assets you’d like to swap, send the crypto to the wallet you just created, navigate to the ‘swap’ option on your dashboard, and select the coins you’d like to swap. You will receive the swapped coin in your wallet balance immediately without waiting for network confirmations.

  1.     Securely store your cryptocurrency: The same way you’d protect your goods and profits if you had a physical store is the same way you need to protect your cryptocurrency so it doesn’t fall into the wrong hands.

You can store your crypto securely on your Obiex wallet but if you want an alternative, physical wallets are also an option. Physical wallets allow you to store your crypto in secure hardware, offline storage device reducing the likelihood of online hackers stealing your hard-earned crypto. This is a list of reliable physical wallets you can use.


If you’re a newbie to crypto trading, the keyword is patience. Taking the time to properly understand the market before making trades will stand you in good stead. While risks occasionally pay off, a patient, long-term strategy is required to make consistent profits. For more information about trading as a newbie, you can check this out to understand unfamiliar crypto terms and to learn more about spot trading and futures.

Obiex Frequently Asked Questions | Obiex FAQs

  • Will I be charged a fee when I swap coins on Obiex? 

No you won’t. While other crypto exchanges charge for trades and require confirmations to execute swaps, Obiex allows you to make free, instantaneous swaps without the delay that comes with waiting for confirmation. This also helps you avoid unnecessary losses.

  • Can I trade crypto on Obiex if I don’t know much about crypto? 

Yes, you can! The Obiex Finance platform allows both rookie and experienced traders to make easy, safe trades regardless of trading experience.

  • Can I send and receive crypto easily?  

Yes, you can. To send crypto, you will use your private key to execute outgoing trades and your public key/your wallet address to receive incoming trades. You can also send and receive crypto using just Obiex usernames.

  • Why do I need to swap coins? 

Swapping coins allows you to either acquire a coin you think is (currently) more valuable than a coin you have a lot of. You can also use swaps to ensure that your funds are invested in a more secure coin like USDT if you feel the volatile coin you’re holding is about to go on a bear run and lose value.

  • Do I get a referral bonus when I invite friends to use Obiex? 

Yes, Obiex has a referral campaign that rewards users that invite their friends and family to trade the minimum of $10 on Obiex.




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Non-Fungible Tokens (NFTs): What Are They And How Do They Work?



Non-Fungible Tokens (NFTs)



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safe-haven asset



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