This Set of Rules Proves that the Blockchain is Valid, but Still Requires a Lot of Power
I often try to help you understand the technical aspects of blockchain and digital assets because there's so much interest in this and so much confusion at the same time. You've ever heard of proof of work? Proof of stake? What is that? Well, why do I care? How does a blockchain operate? Well, I'm going to call proof of work and proof of stake the crypto equivalent to gas and diesel. You know, there are two different ways you can power a car, right?
With an internal combustion engine, it's either gasoline powered or diesel powered. Well, that's how a blockchain works. What powers the blockchain? Either a proof of work or a proof of stake.
Well, Bitcoin was the very first digital asset, and it's powered by a protocol, a set of rules that are called proof of work. In other words, we have to prove that the data on the blockchain is valid, and once it's proven valid, it's now permanent, it's immutable, can never be altered, can never be deleted, can never be copied. And that's what makes it so secure, technologically, cryptographically proven. But that proof of work protocol, that set of rules, the effort to validate that data, that is a difficult, time consuming, cumbersome process.
This was the original blockchain methodology when this was invented back in 2009. And this methodology requires a lot of computing power, and that computing power burns a lot of energy. And that burning of energy contributes to Co2 emissions. And this is a criticism of Bitcoin and it's a fair criticism that it's using a lot of energy consumption. Well, then along came a different method of verifying the data on a blockchain. It's not proof of work. It's proof of stake. Instead of working really hard to validate the data - proof of work, working really hard, you simply stake your money. You simply post your money as collateral. And by posting your money as collateral, the data gets cryptographically authenticated. And simply because you're staking your coins on the blockchain, it doesn't require any work, and therefore it doesn't require any computer effort and it doesn't require any energy consumption. It's over 99% less energy consumption on a proof of stake protocol.
Proof of Stake: Posting or Staking Your Money as Collateral
This is why many of the newer coins use this methodology. So you've got those two different approaches proof of work or proof of stake. If the energy environmental concern bothers you, just choose a coin that uses proof of stake, and you don't have to worry about it. It's really as simple as that. Bitcoin uses proof of work, so does Ethereum. But this summer Ethereum is shifting to proof of stake and many other coins are already there. So your choice? You cannot really care one way or the other about this. It's an internal functionality of the technology, and you don't pay any more attention to that than you do when you drive a car. Do you really think about your internal combustion engine and how it works now so you can ignore this if you wish? If it bothers you, don't buy Bitcoin, instead buy Ethereum or Polkadot or some of the other coins that use the proof of stake methodology. But now you know what those two phrases are. Proof of work and proof of stake.