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?
What is the difference between PoW & PoS?
First of all, I will like to explain briefly the meaning of PoW and PoS respectively, this will help lead to elaborate on their differences.
To start with, PoW in the first place is an acronym for Proof-of-work. This is can be describe as decentralized consensus mechanism which engages members in a concept of solving mathematical puzzle to discourage third parties from manipulating or surfing the network protocol. This is a mining concept that encourages miners to earn rewards when the transaction that is mine is validated.
Again, PoS is an acronym for proof-of-stake. This can therefore be defined as a consensus mechanism protocol that appoints validators at some certain proportionate margins based on the quantity of the crypto coins stake. The quantity of coins stake varies directly proportional to the reward earns, thus the higher the quantity stake the higher the reward earns.
DIFFERENCIES BETWEEN PoW & PoS
| PoW | PoS |
|---|---|
| Proof-of-work is a protocol that uses mathematical operations to solve complex mathematical puzzle to earn rewards after it has been successful performed | Proof-of-Stake is a non-mathematical operations but rather deals with coins which earns a reward based on the quantity staked. |
| The practice of the consensus mechanism is technical and therefore it is expensive | It is less expensive |
| This is a pioneer mechanism used in bitcoin blockchain protocol | This is a pioneer mechanism used in peercoin blockchain protocol |
| Transaction is accurate but consumes much time | Transaction is accurate but it takes less time |
| It is a decentralized blockchain | It is a centralized blockchain |
| It consumes more energy | It consumes less energy |
Advantages & Disadvantages Of PoW & PoS
From the difference stated above, we can determine that both the PoW and PoS has some significant importance as well as some negative impacts. This leads as to the Advantages and Disadvantages of both the PoW and PoS respectively.
ADVANTAGES & DISADVANTAGES OF PoW
Advantages
- It is a decentralized blockchain and therefore the transaction is well secured. Since it is a decentralized blockchain network, the data is safe and no third party can alter the transaction.
- The transaction is efficient and accurate. It undergoes a much technical process to ensure an accurate results in the blockchain
- Rewards are honoured to those successively solve the mathematical puzzles and new blocks are created.
Disadvantages
- It is so expensive: the process involve in this mechanism is so complex and technical and it requires several equipment to undergo the process.
- Time consuming: the process is so tedious and therefore it consumes much time to perform a task.
- Energy consumption: the process involves heavy electronic gadgets which consumes much energy in the processing of mining the blockchain.
ADVANTAGES & DISADVANTAGES OF PoS
Advantages
- High transaction speed: transaction under this is so quick since there are no tedious mathematics involved in the process.
- Energy consumption is less and it is less expensive: this blockchain protocol is less expensive as compared with the PoW and also the energy consumption is less.
Disadvantages
- It is a centralized blockchain protocol: since it is a centralized, transactions therefore will be altered by the central authority and also the data is not well secured as compared with the PoW.
- It is unfair: the protocol is not balance between the rich and the low earners because the rich will always stake higher to earn more than the lower earners.
WHICH IS BETTER IN SCALING CAPACITY?
The Proof-of-Stake has empirically observed to have a good scaling capacity as compared with the Proof-of-Work. The scaling capacity is the ability of network protocol in blockchain to be able to perform efficiently accurate irrespective of the change in block size.
The PoW is requires an a complex mathematical computation system to process which is so expensive for miners to afford. Also it the transaction speed is low and also consume a lot of energy to be processed. Which however seems to have a scaling issues with respect to changes of the block size on the blockchain.
However the Proof-of-Stake is known to the consensus mechanism is well perform irrespective of the changes that occurs in the network. Again, it observed that, PoS block size is much larger which enables to process transactions faster and also boost it scaling capacity.
EXAMPLES OF COIN ADOPTING THE PoW AND THE PoS
Proof-of-Work
- Bitcoin
- Ethereum
- Dogecoin
- Litecoin
- Monero
Proof-of-Stake
- Binance coin
- Peercoin
- Gridcoin
- Neo
- Blackcoin
CONCLUSION
The consensus mechanism has impacted more knowledge to my understanding on the blockchains and the crypto world. Also I get know the coins that is adopting PoW and PoS respectively. I will therefore give much regards to Professor @sapwood for an educative and an understandable lecture. Thank you!