What is proof of work?

Most cryptocurrencies including Bitcoin run on “proof-of-work.” Proof-of-work as a process has the following steps to it:

The miners solve cryptographic puzzles to “mine” a block to add to the blockchain.
This process requires an immense amount of energy and computational usage. The puzzles have been designed in a way which makes it hard and taxing on the system.
When a miner solves the puzzle, they present their block to the network for verification.
Verifying whether the block belongs to the chain or not is an extremely simple process.

That, in essence, is what the proof-of-work system is. Solving the puzzle is difficult but checking whether the solution is actually correct or not is easy. This is the system that Bitcoin and Ethereum (till now) have been using. However, there are some fundamental flaws in the system.

The problem with proof of work.

As it turns out, there are quite a few problems with proof-of-work.

First and foremost, proof of work is an extremely inefficient process because of the sheer amount of power and energy that it eats up.
People and organizations that can afford faster and more powerful ASICs usually have a better chance of mining than the others.
As a result of this, bitcoin isn’t as decentralized as it wants to be. Let’s check the hashrate distribution graph:

As you can see, ~65% of the hashrate is divided among five mining pools alone!

Theoretically speaking, these big mining pools can simply team up with each other and launch a 51% on the bitcoin network.

So, to solve these problems, Ethereum looked to Proof of Stake as a solution.

What is Proof of stake?
Proof of stake will make the entire mining process virtual and replace miners with validators.

This is how the process will work:

The validators will have to lock up some of their coins as stake.
After that, they will start validating the blocks. Meaning, when they discover a block which they think can be added to the chain, they will validate it by placing a bet on it.
If the block gets appended, then the validators will get a reward proportionate to their bets.