A process to appoint the node which gets to create the next block. These nodes are called Miners in PoW based systems. A miner is chosen based on the fact of how quickly it can solve a computational heavy puzzle. Solving this puzzle requires a certain capital expenditure by the miner in the form of specific hardware and energy. Malicious behavior by a miner is detected by other nodes and results in the miner not receiving any compensation for his/her operations. Hence, malicious behavior results in a miner having expenses, but not being compensated for his work and thus having to bear losses.
Blockchains are run and maintained by a decentralized, globally distributed network of nodes and not a central entity. Hence, a mechanism is needed that helps this network, often-times consisting of unknowing or untrusting parties, to establish security, validity, and guaranteeing availability. Currently, there are two main mechanisms, namely Proof-of-Work and Proof-of-Stake, that are used in blockchain networks to provide for security through economic incentives and cryptography. Furthermore, these mechanisms help to appoint the next node which gets to add a new block to the blockchain.
