Proof of Stake and Proof of Work

Proof of work has proven effective ever since the network was launched just over 10 years ago. Complex systems are nearly impossible to get right, so I strongly appreciate things that seem to “just work,” even despite some flaws.

One of the properties that seems important to proof of work is that the system requires you to spend an external resource (money and/or electricity) to acquire the asset (Bitcoin). At first glance, proof of stake appears to lose this property, since the money locked up in proof of stake is denominated in the asset, there appears to be a spending the asset to acquire more of the asset.

However, under the hood, stakers still perform similar duties to miners in proof of work, such as block proposing, validation, etc., and in practice this requires running hardware (locally or server in the cloud). Thus you must spend an external resource to acquire the asset, albeit significantly less. This has some nice properties assuming proof of stake can actually work in practice.

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