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CFA Level I · CFA Level I Exam · Introduction to Digital Assets

A network using proof of work is compared with one using proof of stake. Which statement is most accurate?

Proof of stake selects validators according to the cryptocurrency they stake as collateral and generally consumes less energy. Proof of work depends on solving computationally intensive puzzles, which uses more energy. The other statements reverse the mechanisms of the two approaches.

  1. AProof of stake selects validators by the amount of cryptocurrency they commit as collateral, generally using less energy than proof of workCorrect
  2. BProof of work selects validators by their staked holdings and uses less energy than proof of stake
  3. CProof of stake requires validators to solve computationally intensive puzzles, making it more energy intensive

Explanation

Proof of stake chooses validators based on coins staked, which can be forfeited for misbehavior, and avoids intensive computation, so it generally uses less energy. Proof of work relies on computational puzzle solving and is energy intensive. The other two options reverse these features.

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