Proof-of-Work and Proof-of-Stake: what is it in simple terms?

The key feature of this mathematical problem is asymmetry: it should be moderately difficult for the miner, but easy enough for the network as a whole. This is achieved through cryptography. Every miner in the network tries to solve the problem first; at the same time, it can actually be found only by direct enumeration, so many attempts are required for a successful solution.

An example, perhaps a little fantastic, but illustrative. Imagine being handed a keyboard with several million numbered keys. You are looking for exactly the key that you need to complete the task correctly, but you do not know its number, so you sort through everything. There is a crowd around you, also looking for the right key.

Suddenly you found the right key, tell everyone “guys, I found the key, its number is 22 875”. Everyone around starts checking key number 22875, and oh yes, it is. The one who finds the key first wins a prize. Each is then given another keyboard with several million more keys on it. Everything starts again.

Unfortunately, while a mining company finds solutions in the real world, it also uses a lot of real world resources. Mining requires a constant purchase of equipment and a huge amount of electricity. People concerned about the planet and the environment are starting to raise the issue of excessive use of electricity for mining.

It takes a lot of energy to run computers or clusters that do mining. The constant turnover of equipment that results from the process rapidly wearing out computer components creates a massive warehouse of obsolete parts. From an environmental point of view, it harms the planet.

In addition, the fact that mining requires serious computing hardware, costing more than the average person can afford, means that the mining society is made up primarily of wealthy and powerful people. This is very much contrary to the idea of decentralization, creating the risk of a capture by a person who controls more than 51% of the computing power of the entire mining ecosystem. Given the huge costs of equipment that will allow you to go into a net plus, it is unlikely that the average person will take up this business.