Is a blockchain without Proof of Work still safe?

The idea of Proof of Work existed even before Bitcoin. Only a few people know that Satoshi Nakamoto did not invent this type of protocol. In fact, it was Cynthia Work and Moni Naor who came up with this concept in 1993. The main goal was to deter cyber-attacks such as a distributed denial-of-service (DDOS) attack. They send several fake requests to exhaust the resources of the computer.

In 1999 Markus Jakobsson and Ari Juels were the ones who published the term ‘Proof of Work’ in a document. But nonetheless, Proof of Work is maybe the biggest idea behind Nakamoto’s Bitcoin white paper – allowing us a persistent transparent public append-only ledger. It is a mechanism of creating consensus between distributed parties. So you don´t need to trust each other but trust the system.

Because not everyone in the network is honest, there has to be a way to prevent cheating. So to secure the Network, miners validate incoming transactions and note them in the block. They all compete by solving a complicated cryptographic puzzle. The solution found is proof that the miner has performed his work to validate the transaction. The first one to find the solution gets a reward. For example, he gets an Ether as payment. We call this process mining. You can use this process for two things in the network. The first one is to verify the legitimacy of a transaction. Secondly to create a new digital currency by rewarding miners for performing the previous task.

So a Blockchain it not secured without proof of work…

However…

There are other proof of concepts that can secure a Blockchain, for example Proof of Stake.

To avoid getting to centralized with the Proof of Work method, we need to find a better solution to validate and create blocks. For this purpose, they invented Proof of Stake.

For Proof of Work an algorithm rewards miners who solve mathematical problems. But with Proof of Stake, the creator of a new block is chosen in a deterministic way. Thus, it depends on your wealth and stake. They previously create all the digital currencies and their number never changes. The miners will not get any reward for creating a block. Instead, they get transactions fees as a reward.

To become a validator you have to deposit a certain amount of coins into the network as a stake. The size of this stake determines the chances of a validator to forge the next block. So the more you put in the higher your chances are.

That sounds unfair because it favors the ones who deposit the most money. But in reality, it’s by far fairer then Proof of Work. The price rich people pay for the mining equipment and electricity bills don’t go up in a linear fashion. Instead the more they buy the cheaper it will get.

If you want to learn more about Proof of work or Proof of Stake