There are two concepts in the world of cryptocurrency – proof-of-work and proof-of-stake. They are crucial components of blockchain technology and these consensus mechanisms help to achieve safety co-operations with transactions.
The difference between them is that proof-of-work is a network protection technology, relies on searching solutions of urgent tasks. It is based on mining. And proof-of-stake is the protecting technology of cryptocurrency network.
So, proof-of-work is the solving of cryptographic puzzles and validating transaction. Proof-of-stake is made for realizing that the transaction is reliable.
All the computers on the network have to be connected to verify the transactions. If it is seen, that a computer does any fraudulent transactions on a network, it will be known with the help of blockchain. Both of these concepts are used to punish malicious actors, who want to disrupt the network.
There are also some disadvantages.
Proof-of-work needs great amount of energy to verify transactions. Computers require a lot of energy, so the blockchain is less environmentally friendly than other systems. And because of competition between miners for rewards a small number of mining pools control the blockchain, what is a sort of substantial centralization.
Proof-of-stake usually requires huge initial investment. People are up to have enough money to buy a network stake, leading to the rich blockchain.
Proof-of-stake and proof-of-work both have advantages and disadvantages, so no system is perfect. Each has its own positive and negative aspects but both of them will be part of cryptocurrency for the long term.