The consensuses: Proof of Work vs Proof of Stake
The blockchain’s technology is always using a securing consensus, a way to secure crypto currencies transactions, expensive enough in energy to discourage cheating.
Proof of Work (POW) and Proof of Stake (POS) are the two main existing types of blockchains, both processing the transactions in different ways.
What is Proof of Work?
POW is today’s classic way of mining, and the most secured; where powerful computers are needed to confirm transactions by mining blocks that are added to the blockchain.
To validate a transaction, each miners has to find the solution to a kind of puzzle, the first one finding it will be allowed to mine the block and receive a reward for it in the blockchains’ cryptocurrency.
Because the POW systems are very energy consuming and will be more and more, the crypto world is slowly moving towards the POS alternative.
What is Proof of Stake?
On the contrary, in the case of POS also called “staking”, you will not need an expensive and powerful mining set up; a simple computer with Internet will do the job.
You have to own the coins and ensure you are not using them, thus also ensuring their current value. Then the more coins you will own this way, the more rewards you will earn.
Masternodes are not necessarily POS, as some POW projects also makes use of masternodes; however the way they generate passive income by just owning the coin is similar to how POS system users get their earnings.