Homework | Crypto Academy Season 3 Beginners' course - Task 4: Different types of Consensus Mechanisms

(1) What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?

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Proof-of-Work(PoW)

Proof of Work is a decentralized compromise mechanism used in cryptocurrencies mining. The transactions here are validated and recorded in the public ledger by the miners. This proof is the first compromise algorithm used in blockchain technology. Mining requires a lot of energy so miners have to work hard to earn coins. It gives the miners the power to mine the coins they own.

Advantages of PoW

• The system is decentralized so that anyone can participate in the mining process.

• The system is designed with high security to require a power of 51% to destroy the system.

• There is no need for a reliable third party to transact here.

• Transactional puzzles are used to verify and validate transactions within in the system, thus increasing the accuracy and reliability of transactions.

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Disadvantages of PoW

• The disadvantage is that more and more miners are connected to the network which requires a lot of energy.

• As the number of miners who join in the process of solving complex mathematical puzzles in the system increases the privileges they receive become less and less per capita.

• In order to reap the maximum benefits from the mining system high quality machinery has to be used. Then the maintenance cost of such equipment also goes up.

• It reduces network activity as it takes longer for commercial transactions to take effect.

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Proof-of-Stake(PoS)

Proof of Stake is a centralized compromise mechanism designed as an alternative to Proof of Work. The validator is selected in proportion to the shares here and on the basis of the shares. Such to do or validation of block transactions is based on the amount of coins held by a valid holder. That is, if a valid holder has a large amount of coins his trading power is high.

Advantages of PoS

• No need for mining. That is validators are selected based on the defined components.

• Ability to reap benefits in proportion to the shares held by a valid holder.

• Such systems do not require mining so energy is efficient.

• The key components of the system are the economic components and the mechanisms by which incentive mechanisms can be reached.

• There is no division of privileges because there is no partnership between the validators.

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Disadvantages of PoS

• The power of the system is centralized.

• Low security compared to PoW.

• A person with a small amount of coins will not be able to contribute to the system as a high investment is required to contribute to it.

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What is the difference between PoW & PoS?

Image Source

Proof of Work	Proof of Stake
🔹 The first conventional algorithm in blockchain technology.	🔹 Designed as an alternative to Proof of work.
🔹Participants in the system are miners.	🔹Participants for the system are validators.
🔹The probability of digging a mine depends on the size of the calculations.	🔹No such mining is required and censorship transactions can be made based on the amount of coins held by a valid holder.
🔹Miners use computer power to solve transactions and equations in the mechanism.	🔹Valid holders use their coins to reach such agreements.
🔹Energy is inefficient because the scale capacity is limited.	🔹 It has energy efficiency compared to Proof of work.
🔹 In terms of security, it is high.	🔹 It has less security than PoW.

🔹Having a decentralized compromise mechanism.

🔹Having a centralized compromise mechanism.

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Which one is better in scaling Capacity? Examples?

✔️ In light of the above the Proof of Stake has a better capacity scale compared to Proof of work. This is because PoS is a system designed as an alternative to troubleshoot Proof of work. It also increases the energy efficiency of PoS.

Example :-

• Ethereum
• Dash
• Peercoin
• Nxt
• Blackcoin
• ShadowCoin

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Professor @Sapwood's article was very helpful to me in completing this achievement. I wrote this article after studying it well.

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Thanks for reading

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