Crypto Academy Season 3 Beginners' course - Homework Post for Task 4: Proof of Work and Proof of Stake
Hello friends of Steemit.
It's great participating in this course. Thank you Professor @sapwood for this great lecture.
I have completed one of the homework task you gave. Below is my submission.
What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
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BRIEF MEANING OF PoW and PoS.
Proof of work (PoW) and Proof of Stake (PoS) are consensus mechanisms that a required to confirm a transaction in blockchain.
PoW is a consensus algorithm that requires an agreement between the blocks in a blockchain to confirm a transaction. It involves solving a difficult cryptographic problem to ascertain that the transaction sent for confirmation is valid before the confirmation is made.
Different networks nodes connected systematically to each other tries to solve this problem independently and differently. Once the problem is solved, the transaction is confirmed and initiated. This takes a couple of time. The cryptocurrency that uses this consensus mechanisms is Bitcoin. This is why a bitcoin transaction takes a minimum of 10 minutes to confirm.
On the other hand, PoS is a consensus algorithm that was developed as an alternative to the PoW. It is an improvement on the PoW mechanism adopted by BTC blockchain project. It was developed by Scott Nadal and Sunny King in 2012 as a result of the high cost in using PoW mechanism. The Peercoin blockchain project was first founded on this consensus mechanism. The Ethereum blockchain project is about to move from PoW to PoS but the date when this would happen has not been disclosed.
DIFFERENCES BETWEEN PoW AND PoS
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| Proof of Work | Proof of Stake |
|---|---|
| It was developed by Satoshi Nakamoto | It was developed by Scott Nadal and Sunny King. |
| It takes a minimum of 10 minutes to confirm transaction. | It processes transactions in seconds and to confirm transaction in maximum of 2 minutes. |
| The first blockchain project built on it was Bitcoin blockchain | The first blockchain project built on it was the Peercoin project. |
| There are limited number of transactions it can do at the same time, between 5 and 10 | It can performs lots of transactions at once i.e up to 15. |
| It relies mainly on electricity in it's operation making it very costly | It does not fully rely on electricity in its operation therefore it is less costly. |
| The popular cryptocurrencies that use PoW are Bitcoin, Bitcoin cash, Litecoin | The Dash cryptocurrency and Neo protocol now uses PoS |
Advantages and Disadvantages of PoW
Advantages:
It is the most valuable consensus mechanisms amongst miners. Since it is not easy to solve any cryptographic problem, any miner who able to solve one is rewarded very well with BTC or any other coin that the transaction was done and with the current price of BTC, the miners get cool money.
It favours reaching an agreement amongst miners and network nodes. This is because all the miners work in a chain at a particular with no divided attention else they are punished for delay.
It is very secure to use.
In a Proof-of-work network, the majority of voting power when implementing important changes to the system is divided among miners, developers and other crucial members of the community.
Disadvantages.
It is very expensive and also resource intensive. PoW uses strong computer gadgets that are expensive. This gadgets consume a lot of electricity while working making its use expensive.
The scalability of PoW is slow. It takes a lot of time for transactions to get confirmed.
It can only process few transactions at a time.
The process of confirming and validation of transaction is very similar to centralized system.
Advantages and disadvantages of PoS
Advantages.
- PoS is not fully dependent on the use of electricity, making it less expensive.
- It's highly scalable. It takes seconds to validate or confirm transactions.
- It can process higher number of transactions at the same time when compared to proof of work.
Disadvantages:
- The security of PoS is not highly guaranteed.
- Top stakeholders of PoS have the ability to make technical changes and decisions without considering the community members or what they want.
THE better consensus mechanism as regards to scalability.
From the foregoing, it is evident that PoS is better in scaling capacity when compared with PoW. This is because in PoS, it takes very small periods for transactions to get validated. For example, when Ethereum blockchain changed some of the codes used in PoW, it takes lesser time of about 16 seconds to confirm transactions done on Ethereum blockchain because it is shifting to PoS. Other blockchain projects fully built on PoS takes just about 10 seconds to validate transactions. This does not happen with PoW as it takes not less than 10 minutes to get transactions confirmed. Sometimes, it takes hours.
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