Compare and contrast Proof of Work and Proof of Stake consensus mechanisms with examples.

Proof of Work (PoW) and Proof of Stake (PoS) are consensus mechanisms that secure blockchain networks through different approaches and incentive structures.\n\n**Proof of Work (PoW):**\n\n**How it works:**\n• Miners compete to solve computational puzzles\n• First to find solution gets to add block\n• Requires significant computational power (electricity)\n• Security through economic cost of attack\n\n**Mining Process:**\n1. Collect pending transactions\n2. Create block with transactions\n3. Try different nonce values to find hash starting with zeros\n4. First miner to solve puzzle broadcasts solution\n5. Network verifies and accepts block\n6. Miner receives block reward + transaction fees\n\n**Examples:** Bitcoin, Ethereum (pre-2022), Litecoin, Dogecoin\n\n**Proof of Stake (PoS):**\n\n**How it works:**\n• Validators are chosen based on stake ownership\n• Higher stake = higher chance to validate blocks\n• No energy-intensive mining required\n• Security through economic penalties (slashing)\n\n**Validation Process:**\n1. Validators lock up cryptocurrency as stake\n2. Algorithm randomly selects validator weighted by stake\n3. Selected validator proposes new block\n4. Other validators verify and vote on block\n5. If majority agrees, block is added to chain\n6. Validator receives transaction fees as reward\n\n**Examples:** Ethereum 2.0, Cardano, Polkadot, Solana\n\n**Key Differences:**\n\n| Aspect | Proof of Work | Proof of Stake |\n|--------|---------------|----------------|\n| **Energy Use** | Very High (150 TWh/year for Bitcoin) | Very Low (99.9% less) |\n| **Hardware** | Specialized ASICs | Standard computers |\n| **Barrier to Entry** | High capital cost | Token ownership |\n| **Block Selection** | First to solve puzzle | Random weighted by stake |\n| **Finality** | Probabilistic (6+ confirmations) | Faster (minutes) |\n| **Centralization Risk** | Mining pools | Large stakeholders |\n| **Attack Cost** | 51% of hash rate | 51% of staked tokens |\n| **Penalties** | Electricity cost | Slashing (lose stake) |\n\n**Security Models:**\n\n**PoW Security:**\n- Attack requires controlling 51% of network computing power\n- Attacker must continuously spend electricity to maintain attack\n- Economic incentive: attack cost > potential profit\n\n**PoS Security:**\n- Attack requires owning 51% of total staked tokens\n- Malicious validators lose their staked tokens (slashing)\n- Economic incentive: attack destroys attacker own wealth\n\n**Environmental Impact:**\n• **Bitcoin (PoW):** ~150 TWh annually (country-level consumption)\n• **Ethereum (PoS):** ~0.0026 TWh annually (99.95% reduction)\n\n**Trade-offs:**\n\n**PoW Advantages:**\n• Proven security model (Bitcoin 13+ years)\n• True decentralization\n• No "nothing at stake" problem\n\n**PoW Disadvantages:**\n• High energy consumption\n• Slower transaction processing\n• Expensive to participate\n\n**PoS Advantages:**\n• Energy efficient and environmentally friendly\n• Faster transaction finality\n• Lower barrier to participation\n\n**PoS Disadvantages:**\n• Newer, less battle-tested\n• Potential for centralization among large holders\n• "Rich get richer" dynamics\n\n**Hybrid Approaches:**\nSome networks combine both mechanisms or use variations like Delegated Proof of Stake (DPoS) to balance security, efficiency, and decentralization.