What is cryptocurrency?






What is proof of work?



Bitcoin uses the Hashcash proof of work system.

One application of this idea is using Hashcash as a method to preventing email spam, requiring a proof of work on the email’s contents (including the To address), on every email.


Hashcash proofs of work are used in Bitcoin for block generation. In order for a block to be accepted by network participants, miners must complete a proof of work which covers all of the data in the block.





This protects the block chain from tampering.



What is proof of stake?

Proof of Stake is a proposed alternative to Proof of Work. Like proof of work, proof of stake attempts to provide consensus and doublespend prevention (see “main” bitcointalk thread, and a Bounty Thread).

Because creating forks is costless when you aren’t burning an external resource Proof of Stake alone is considered to an unworkable consensus mechanism.

It was probably first proposed here by Quantum Mechanic. With Proof of Work, the probability of mining a block depends on the work done by the miner (e.g. CPU/GPU cycles spent checking hashes).

With Proof of Stake, the resource that’s compared is the amount of Bitcoin a miner holds – someone holding 1% of the Bitcoin can mine 1% of the “Proof of Stake blocks”.



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