Crypto Academy Season 3 Beginners' Course Homework Post For Task 4: Concensus Algorithm by @hibbanoor
What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
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Consensus Algorithm
In blockchain technology, when a transaction is performed, it is validated by all the participant. Only after get validation from all the participants, the transaction is recorded on the blocks. All the nodes get agree on the current state of ledger. FOr this purpose, multiple consensus algorithm are used in blockchain network. These algorithms bring all the nodes to a point where they all agree to validate the transaction. Moreover, these algorithms use or maintenance of network. Multiple consensus algorithm are being used such as PoW,PoB,PoS etc.
Difference between PoW and PoS
Proof of Work
PoW is a consensus algorithm which is used to bring all the participants nodes on a point where they agree to validate the transaction. The transaction get validation and then recorded on the ledger. This algorithm need high energy and computing effort to perform the complex calculation. Much power is consumed for maintenance of security.
When a transaction is performed, the PoW then assigned task to all the nodes for validation of this transaction. After get verifying and validated by all the nodes, the transaction id stored on the blocks where anyone can read it. Minors use much energy for approving the transaction. All the transactions are transparent on network.
| Proof of Word characteristics | Description |
|---|---|
| Speed | The speed depend upon the time which is taken in block generation on any network. Average time which require in generation of blocks in PoW is 10 minutes. |
| Power | Minors burn their assets in PoW to validate the |
| Reward | Minors need to verify and validate the transaction for getting the crypto currencies as reward |
How does PoW work
The PoW is an old algorithm which was introduced in 2012. The basic idea behind its creation was that The more the node mine the coins, they more power it will have. By using the PoW consensus algorithm, the nodes become enable to generate the new blocks in network. They need to perform some mathematical calculation and generate new blocks. The other nodes try to solve that mathematical riddle. If any node find solution, the consensus algorithm allow that node to get that generated block. The speed of generating blocks is different for networks.
Cons of Consensus algorithm
1- It is an old consensus algorithm which is being used frequently.
2- The minors get reward for validation.
3- The PoW make the mining process simple and easy.
4- There is no need to meet the certain criteria to access the network. By using PoW, just computation power is require. Having computational power, you can access the network.
5- It is used in the world largest crypto currency. Bitcoin.
Prons of PoW
1- As I mentioned above that only power is require for PoW, so this algorithm increase the power consumption. High energy and power is consumed in mining any currency which use PoW.
2- It take much cost is solving the complexs mathemtical calculation.
3- PoW is also consider a Waste of resources.
Proof of Stake
In PoS the selection of block generator depend upon the Stake. There are more chances to become a validators if you have high stakes. People in PoS lock their assets to become minors.
When an unstake transaction is started, the minors then are able to get their locked assets back. The minors get the reward for validating the transactions in PoS. This encourage the minors.
| Characteristics of Proof of Stake | Description |
|---|---|
| Locking assets | you need to lock your assets if you want to become minor |
| Unlocking assets | When an unstake transaction get started, the minors who have locked their assets are able to unlock and get their assets back. |
| Reward | The minors get reward for validating the transactions in form of crypto currencies. |
How does PoS work
Here the reward is given to the minor who verified the transaction. The reward is given in form of crypto currencies. The people lock their assets to become minors and can get their assets back after an unstake transaction is begin. The people earn reward by locking and holding the oins in PoS.
Cons of PoS
1- Fast: PoS is fast.
2- Less Costly: No high energy equipment's are require in PoS.
3- Decentralized: It is decentralized which mean no third party involve or influence.
4- Reward: The people are rewarded for locking and holding the coins
Prons of PoS
1- Active internet connection. You cannot use the PoW without internet. You need an active internet connection in order to use the PoW.
2- Costly updation process. The PoS is costly in sense of its updation. It require high cost to up date it.
3- Expensive: The more coins you have, the more powerfull you will be.
Difference between PoS and PoW
| Proof of Stake | Proof of Work |
|---|---|
| This consensus algorithm is used for verification of a transaction performed on the blockchain network | This consensus algorithm is used for verification of a transaction performed on the blockchain network. |
| Minors need to have more coins to have more power. | Minors need a very high power and energy consumption to become powerful. |
| It is an alternative which were introduced after the PoW | It is an old consensus algorithm which was introduced in 2012 |
| Take less time in performing transaction | Take much time as compare to PoS in performing a transaction |
Which one is better in scaling Capacity? Examples?
The scaling capacity refer to the ability of assisting the more transactions. The scaling capacity of PoS is better then PoW because it seem to maintain the much transaction on the blockchain which use the PoS. The speed of PoS is high as compare to PoW which attract more people to perform transaction on its blockchain. The PoS does need need the high energy or bandwidth to perform its functionality. It work well even with low power consumtion.
Byzantine Fault Tolerance (BFT) is being used in PoS to sort out all the scaling related problems. Here the random selection of minor is done. That person become validator. Then it is decided that should a transaction get validation or not. if it get validated, it is stored in blocks of blockchain. Thus it become a part of chain.
PoS does not need to consume much energy like PoW. You just need to stake and holf the coins. The more coins you hold, the more the chance to become a minor.
The block size in PoW is very small which cannot assist the much transactions. The speed of blockchain then slow down. But this type of problem not occur in PoS. The PoS is faster s compare to PoW. It is decentralzied which attract much users because they feel free to express their ideas. There is not owner, all are equal which also built confidance in users. More transactions are performed in less time.
Example: The bitcoin use the PoW. The bitcoin can perform only 7 transaction in one second. But if we talked about
Conclusion
I have learnt in this lecture about PoW and PoS. Both have their importance in their own way. The purpose of both is validating a transaction. Both have some advatages and some dark sides. The second concept i ot is scaling capacity of a consensus algorithm. After reading some articles, i come up with this point that scaling ability of PoS is better than PoW.