What are the differences between PoW and PoS?

/ crypto , cloakcoin , pos , proofofstake , pow , proofofwork , dpos , poc
As the dust settles following the great blockchain rush, now is an opportune time for a greater understanding about the operational aspects concerning blockchain technology.

Many misconceptions and errors have been flying around without any hard evidence or truth about what blockchain is.

At CloakCoin, we aim to keep our users and any potential users educated in the world of blockchain and to help them make decisions based on facts and informed logic.

The underlying consensus mechanism for a project is responsible for synchronizing nodes for the nodes to determine the legitimacy of transactions requested on the blockchain.

Consensus mechanisms come in different types of methods. These include:

  • Proof of Work(PoW)
  • Proof of Stake(PoS)
  • Delegated Proof of Stake (DPoS)
  • Proof of Capacity (PoC).
  • The most commonly used consensus mechanisms are PoW, PoS, and DPoS.

Some platforms have tweaked the consensus mechanisms to suit their individual needs. Just like an exciting performance engine, to achieve optimal performance- changes are often required. The same goes for consensus mechanisms, they are made to satisfy basic needs generally, but to go beyond the minimum, innovation is needed.

Proof of Work vs. Proof of Stake

The majority of this article is based on arguably the two most widely used and recognized consensus mechanisms: PoW and PoS- both are essential to the blockchain ecosystem in their own way.

Proof of Work 🔨

Proof of Work was the pioneer consensus mechanism. Its use as the underlying consensus mechanism for Bitcoin, would significantly influence future cryptocurrencies and blockchain projects to adopt it for their own platforms.

Proof of Work involves mining which is solving complex mathematical problems to earn rights to produce a block. Mining is done by nodes which can be any device with recommended computational power. The first node to complete the puzzle gets the right to produce the block and a reward as well for block production.

The difficulty of the mathematical problem changes depending on the time required to produce blocks and the number of blocks required by the blockchain. More often than not, PoW ends up becoming a guessing game for nodes. Sometimes the puzzles get too complex that guessing becomes the only logical way of solving it, almost like those hard math tests most of us experienced in school. The hardware makes ‘educated guesses’ to try and solve the puzzles faster.

The disadvantage of guessing is the enormous amounts of power it consumes. To increase the chance of solving a puzzle, many guesses have to be made which requires increased power. The energy consumption associated with PoW is, therefore, high- being one of its greatest setbacks.

The other setback PoW faces is its decentralization. Decentralization is the heart and soul of blockchain that users would want to remain intact; as mining pools become more substantial, it becomes easier for power to concentrate within these pools which, in a way, compromises decentralization.

PoW is easy to implement. A simple algorithm and the set up would be complete. However, its energy consumption and possible long-term adverse effect on the environment has made developers seek other options.

How PoW works:

  1. Transactions are bundled into blocks.
  2. Verification of transaction within blocks done by miners.
  3. Miners solve the math problem.
  4. The first miners to solve the problem are given a reward, and rights to produce the next block.
  5. Verified transactions are then stored in public blockchain.


  • Simple to implement.


  • Expensive hardware required.
  • Consumes much energy.

Proof of Stake 💻

Proof of Stake is like the younger, fun, non-math brother of PoW. Instead of solving puzzles and using enormous amounts of energy, PoS determine which nodes have the right to produce blocks on the blockchain. The basis of selection is the number of coins a node has and the amount of time they have kept the coins. Older and more coins translate to higher points in the PoS system. There are also rewards for mining.

The PoS system logic is that nodes that have more coins and have kept them for a more extended period have vested interest in ensuring the success of the coin. Therefore, they are likely to desire improvement in the performance and value of the coin.

The PoS system is a much more energy efficient and environmentally friendly system. Instead of miners, PoS has validators who stake their coins which then gives them the power to produce blocks and also gives them voting rights in the blockchain. Validators can improve their rankings without having to upgrade their computer systems.

Validators in the PoS set up remain tied to the blockchain as they have their coins staked there.


  • Energy efficient.
  • Cheaper for validators.


  • Can easily become centralized.

There has been a migration from PoW to PoS due to the high energy consumption and inefficiencies resulting from PoW. It only makes sense to shift from a high-power low-efficiency system to a low power highly efficient system especially because most nodes are trying to get as much in net profit from their activities.

Now, having looked at the workings of PoS and PoW, we can take a look at the iterations and modifications that have been done to get the best out of these systems. One of the fascinating systems, in terms of simplicity and suitability of the blockchain, is hybrid PoS/PoW system used by CloakCoin which is now on its interest-bearing pure PoS stage.

CloakCoin’s Choice of Consensus

At the heart of the PoS tweaks on CloakCoin is the desire to reward its nodes consistently. Satisfied nodes result in a win-win situation for any platform. If the nodes are happy, then the platform remains active and runs efficiently.

In the traditional PoS set-up, those with older coins would likely get more rewards even if they do not participate in staking frequently. CloakCoin makes amendments on its PoS design such that nodes are awarded by staking and participation while eliminating the coin age factor that is a staple of PoS.

Essentially, CloakCoin’s design rightfully rewards those who stake more and remain connected to the platform longer. The coin age is reset whenever a node disconnects.

Using this PoS consensus, CloakCoin offers 6% interest annually on staked coins.

It is only logical for nodes to want to stay connected for longer on the platform to get more rewards; as such the result of CloakCoin’s tuned PoS is nodes staying connected for longer while staking more coins.


Proof of Stake is preferred compared to PoW; it’s just far more superior. PoS still needs some editing to make it better. It provides a good base for any platform, but for that unique buttery performance, a few tweaks are needed.

Now, you’re aware about how PoW and PoS mechanisms work.

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