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On the flip side, if a validator adds an inaccurate block, they lose some of their staked crypto. The node then adds the accurate block to the blockchain in exchange for crypto rewards. The PoS protocol chooses a validator node to check a block of transactions for accuracy. The validator stakes their crypto on the network for a set period in order to be allowed to verify transactions. The proof-of-stake mechanism allows users of crypto to stake their crypto on the blockchain so that they can create their own validator nodes. The consequence of this process is that mining devices worldwide compute the same problem, which uses a substantial amount of energy since mining requires lots of electricity. Whichever miner solves the problem first is allowed to add a block of transactions that earns them rewards. Under the PoW mechanism, miners compete to solve complex mathematical problems. PoW is the original consensus mechanism for verifying transactions that bitcoin used. Both are essentially different algorithms that allow users to add transactions and record them on a blockchain, an immutable public ledger.īefore the Merge, you had to go through the energy-intensive process known as proof-of-work (PoW) to create Ethereum tokens. This is why many cryptos either use proof-of-stake or proof-of-work to validate crypto transactions. Cryptocurrencies are decentralized, meaning they don’t have the control of a financial institution to verify transactions. The proof-of-stake concept is fairly technical, and we did our best to break it down in a previous post here.

However, lower fees haven’t come into effect on the Ethereum network yet. The merger should make it easier to introduce upgrades to the network in the future. This merger is positive news for those who are socially conscientious investors because of the significant decrease in energy consumption.