Crypto Academy Season 3 Beginners' course - Task 4: Different types of Consensus Mechanisms [POW & POS]-Homework

Question:1
what is the difference between PoW and PoS? Advantages and Disadvantages? Which one is better in scaling capacity? Examples

Proof of Work: is a algorithm or consensus mechanism that uses computing power to solve complex mathematical puzzles.

The proof of work required more energy for the maintenance of the blockchain Example; Litecoin, monero, Zcash etc.

Proof of Stake: is a protocol that validates block transactions randomly, based on the amount of coins you retain.

This means that, the more coins you have as a miner, the more power you in the proof of stake blockchain Example; Tezos (XTZ), Lisk (LSK), Cosmos (ATOM) etc.

DIFFERENCE BETWEEN PROOF OF WORK (PoW) AND PROOF OF STAKE (PoS) IN BLOCKCHAIN.

1. The proof of work invest in buying expensive hardware, Whilst, Proof of stake invest in buying stake and building of reputation.

2. Proof of work consume more electricity energy of an estimated amount of $145,000 per day, which is costly. Whilst, Proof of Stake systems consume less electricity energy with low cost, which we consider as energy efficient as compare to proof of work.

3. To min a block is measured by the amount of computational work done by the miner. Whilst ,To validate a new block is measured by the amount of coins possessed by the person.

4. In Proof of work, the first miner who is able to solve the cryptographic puzzle of all or each block is rewarded . Whilst, In Proof of stake, the validator receives network fee as reward.

5. The consensus building algorithm of Proof of work uses bitcoin well known as SHA256 in crypto function. Whilst, Proof of stake uses different variants of proof-of-stake consensus building algorithm such as; Tezos (XTZ), Lisk (LSK), Cosmos (ATOM), and others.

ADVANTAGES OF PROOF OF WORK.

1. The proof of work system results are in a decentralized form, which makes it a decentralized system.

2. In Proof of work, miners gets their rewards share from the transaction fee and block reward.

DISADVANTAGES OF PROOF OF WORK.

1. The high energy consumption level of the proof of work affects the environment as compare to proof of stake.

2. The Proof of work needs large network to be able to guarantee adequate security.

3. The proof of work system is costly.

ADVANTAGES OF PROOF OF STAKE.

1. The proof of stake system is energy efficient, since it consumes less energy.

2. The proof of stake is more secured than the proof of work, since it needs less energy to guarantee adequate security.

3. In proof of stake system, mining power is distributed or shared in a ratio of the held.

DISADVANTAGES OF PROOF OF STAKE.

1. Proof of stake only help the rich to be richer, since the reward system is randomly, and is based on the amount stake.

2. Hackers may get opportunity in proof of stake to make duplex spending attack, due to the verification on multiple chains.

WHY IS PROOF OF STAKE BETTER IN SCALING CAPACITY.

1. In the case of scaling, proof of stake system is much better, because hackers faces much difficulty in attacking, since 51% attack, the hacker only gets the same 51% of the cryptocurrency, which is non-profitable to them.

2. Scalability is stable in the proof of stake, because the validators are randomly selected for each round , where they will only agree if the block becomes a portion of the chain.

3. In addition, comparing the proof of stake system to the proof of work, it can be seen that, the proof of stake is good for the environment, making it much scalable.

CONCLUSION

Look at things critically, the Proof of stake system has provide solutions to the problems of bitcoin scalability, and also help in the conservation of energy.

Thank you

Cc: @reminiscence01

CC: @sapwood