Much of the public now understands, at least in general terms, what a “cryptocurrency” is. What is not so widely understood, though, is the controversy over “proof of work” as a method of creating or ‘mining’ cryptocurrencies. and the fact that much of the crypto world is now in the process of a transition to something else, called “proof of stake.”
Proof of Work:
For a cryptocurrency that uses “proof of work,” including the Matriarch of the group, bitcoin, one party to a transaction, (the prover) must show the other (the verifier) that a certain amount of computational effort has been expended. This is the equivalent of letting the seller of a product or service look closely at the dollar bills you plan on using to pay for that product. In each case, the point is to avoid counterfeit.
But since a proof of work system necessarily uses a lot of computational effort, it uses up a lot of electricity. This means, as critics have long charged, that Bitcoin can be bad for the environment. It requires the expenditure of a lot of energy which requires the burning of more fossil fuels, and the release of carbon emissions at the power plants.
Strange New Worlds:
The many of the newer coins in the crypto space have been built on a “proof of stake” system. Such a system is a consensus mechanism, in which verifiers validate either others’ stake, in a way that would require potential hackers/counterfeiters to acquire a large fraction of the tokens on the blockchain to mount an attack. Such a system has much more modest electrical demands.