Crypto Academy Season 4 Beginners' course - Homework Post for Task 6: Proof of Work and Proof of Stake || by @rhyda
I am here with you today to submit my assignment on the topic:
What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
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Before we start let’s get to know what proof of work and proof of stakes are before we state their differences
Proof of work is a consensus algorithm that is used to validate transactions, it is also used to broadcast new blocks to the blockchain market.
Even though POW has been in existence for a long time, Satoshi Nakatomo adopted the idea when he first introduced Bitcoin in the year 2009 and since then people have been using the idea of POW.
It has then been spread to become the most used consensus algorithm in the cryptocurrency.
Proof of work is a decentralized mechanism.
This means it requires a lot of effort of computing to solve problems.
Miners from a network compete against each other to solve complex puzzles. These puzzles are always difficult to solve but also very easy to verify the correct solutions. Once the puzzle is solved they then push it to other miners to verify whether the solution is correct.
Even though POW has been in existence for a long time, Satoshi Nakatomo adopted the idea when he first introduced Bitcoin in the year 2009 and since then people have been using the idea of POW.
An example of a cryptocurrency that uses this is Bitcoin, Litecoin, and Bitcoin Cash. This is why it takes so long for about 10-15 minutes for a Bitcoin transaction to go through. When a transaction is been initiated, that transaction goes through a series of verification to confirm. In the process of verifying miners are been tasked by solving cryptography puzzles to check to see whether the transactions are valid.
Miners are been selected randomly to solve the puzzle.
Unlike POW that uses miners, Proof of stake has no miners but instead, it has validators. One can only be a validator depending on the number of coins he/she holds.
Proof of stake may be of help by attracting stakeholders to invest and earn more and better rewards.
Proof of stake runs on a centralized basis which makes it venerable to attacks.
One can say that proof of stake is the opposite of proof of work.
Coins like Etherum, Dash, and Neo plans on switching from the POW to POS but haven’t announced any date yet.
Let’s take a look at some of the differences between the two.
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proof of work requires a lot of electric energy that miners need when it comes to selling their coins whiles proof of stake only gives them the power based on the percentage of the coins they have.
Proof of work runs on a decentralized system whiles proof of stake tends to be centralized
Proof of work systems are always difficult for hackers to penetrate whiles proof of stake systems are always vulnerable to attacks
As we have seen some of the differences between POW and POS. Let’s talk about some of the advantages and disadvantages of POW
Since it is run on a decentralized system it is quite difficult to hack
Miners get rewards for solving a puzzle which let me say serves as a source of employment for the miners as they get paid for what they do
POW requires a lot of energy and high-class machines.
Waste a lot of money in getting the machines and also maintaining them.
Requires a lot of time and manpower.
requires tons of time and attention
Less energy consumption.
POS doesn’t require any high machines to run on.
Transactions in POS systems are fast and reliable.
Requires less time and attention
High risk of been hacked
People with higher stakes get a favor. Thereby making it difficult for those with lower stakes.
POS is run on a centralized basis which makes it breaks the law of decentralization.
Let me say since POS was created out of the backbone of POW. This means POS is more scalable than POW. This is because looking at the two, POS works to solve the problems of POW. This means POS was created to make things simpler in terms of transactions which takes less time to validate.
Example is
The Etherum:
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Etherum is one of the most popular cryptos in nowadays world. A new version has been launched which is Etherum 2.0. Etherum is one of the cryptos that has adopted the POS system.
I hope I have been able to meet the requirements of the assignment given by professor @sapwood as everything has been done to my understanding of the course.
I am glad to have taken part in this crypto academy assignment.