Crypto Academy Season 4 Beginners' course - Task 6: Different types of Consensus Mechanisms
Hello everyone. The crypto academy is bringing the treasure of knowledge about the crypto world and spreading the information about the crypto currencies and blockchain. This is actually the need of the time to learn the crypto world and to enter into it. In this assignment, i will explain in detail the Proof of Work and Proof of Stake.
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What is the Difference between PoW and PoS?
Proof of Work
PoW is is a protocol which is used on many blockchain to make the security system more strong and the safe the network from any sort of the hacking and cyber attack. This protocol is used on multiple decentralized networks where you do not need of any third party. The PoW make it sure that you can perform the transactions directly computer to computer without involvement of any third party.
When a transaction is perform on the network, all the participant nodes which are known as minor, try to verify the transaction. They try to solve the complex mathematical problems to verify the transaction. All the nodes on the networks are allowed to participate in this mining process under PoW. But the minor who solve that complex mathematical problem first get reward and after that, the transaction is stored on the network.
The stored data is accessible to all. The network is transparent and immutable. But the mining is not easy at all. In this protocol, heavy amount of energy is consumed for mining the transactions and to maintain the system security. The minors need to have the heavy and costly PCs to participate in mining. ASIC is a powerful and costly PC which is used in mining.
Because of the cost of the mining process, the PoW is not use widely now. The minors have to burn their assets in the PoW for validation of the transaction. This protocol is a bit slow. Here the 10 minutes are required to generate the block which slow down the network speed.
Advantages of PoW
Security- The PoW make the network security very high. This make the system secure and safe from any sort of hacking attacks.
Reward- The minor who solve the problem first get the reward.
Bitcoin- This algorithm is used on the largest and first crypto currency which is bitcoin.
Simplicity-
The PoW is simple and a secure algorithm for transaction verification. This make the transaction verification process very easy and simple. Because here you do not need to fulfil any hard and strict requirements to participate in mining. Every participant node on the network can participate in mining process.
Disadvantages of PoW
Speed- The block generation time on the PoW is 10 minute which is very slow.
High energy consumption- In PoW, a very large amount of power is consumed to solve the complex problem to verify the transaction. The mining process is a bit costly.
Resource Wastage- Here we consumed the high power and special heavy machines are used in mining process, so this algorithm is said to be a wastage of the resources.
Proof of Stake
Proof of stake is also a protocol which work same as the PoW but here the mining process is different. In PoW, we have seen that all the participant nodes are able to participate in the mining process but in proof of stake, only those nodes can participate in mining who have stake their assets on the network.
The minors on the network are selected on the base of the coins which are owned by the minors through the PoS. The more coin, the more mining power you will have.
This algorithm is really effective and cover the energy consumption problem which is there in PoW. We know the heavy energy is consumed for mining process and the minors need to burn their coins to fulfill the power expense. This problem is solved by introducing the PoS. Here no heavy energy consumption is required. The coins you owned decide your mining power.
Advantages of PoS
Energy consumption- The energy consumed in the PoS is not as much high as in the PoW. The low amount of the power consumption is done in the PoS.
Reward- The minors can get a good reward for mining the transaction. The network fees is the reward for the proof of stake.
Cost- No heavy machineries are required in the PoS. So it is less costly. Moreover, the minors stake their coins to increase their mining power. In PoW, the minors have to sell their coins so the PoS is also consider better in this way.
Speed- The PoS is more fast as compare to the PoS
Disadvantages of PoS
Security- The security in the PoS is not as much high as in PoW. This protocol is less secure. The hackers can break the system security and can attack the system with even the low power machines.
Mining Power- In the PoS, you need to own the coins. The more coin you own, the more mining power you will have.
Staking- You need to stake your coins in the PoS.
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Difference between PoW and PoS
| Proof of Stake | Proof of Work |
|---|---|
| Use in the verification process of the transactions | Also use to verify the transactions |
| The minors need to own the coin to increase their mining power. | The minors do not need to own and stake the high amount of coin in order to participate in the mining process. |
| This protocol is the Alternative of PoW. It Was introduce solve the high energy consumption problem in PoW | This protocol was introduce in the 90's |
| The energy is not consumed in a very high amount. Energy efficient | A very large amount of the energy is consumed for mining in PoW |
| The speed of mining the transaction is high | This protocol is a bit slow |
| Less secure as compare to the PoW | Provide a very strict security level. |
Which one is better in scaling Capacity? Examples?
Scalability is actually is define as how much transactions can be assist on the network. If we talk about the scalability of the proof of work, many issues were there. The block generation time on the PoW is very large which mean that the network speed is slow. Another scalability issue in PoW is that the size of the block which is generated on the PoW is limited. Initially the size was very small. This created hurdle in performing multiple transactions at once. This protocol initially created the block whose size was just 1MB. This size was not enough to perform the hundred of transactions at a time which slow down the network speed.
All these issues were solved by the PoS. this protocol is faster as compare to the PoW. Here the block size is larger which help to perform multiple transaction and network speed get increase.
The consensus algorithm which is used in PoS is Byzantine Fault Tolerance. This algorithm solve the problem which were there in PoW regarding to the scaling of network. Here the validator is selected on the base of the coin which they have owned. The block are becoming the part of the chain on the base of an agreement. The minors agree on some condition to decide which block should be on the chain and which should not.
After verifying the transaction, it get store on the network and every one can read the stored data on the network. Moreover, the high energy is consumed on the PoW. The mining need to burn their assets to pay the bills on the network but these issues are solve in the PoS. Here the energy consumption is low. Which is equally beneficial for environment. Low energy consumption and high network speed make the PoS more effective and efficient. So we can say that the PoS algorithm has more scaling capacity as compare to the PoW.
If we see the bitcoin network, here the PoW is being used. The transaction speed is slow on this network. Only 7 transactions can be performed per second which is too slow as compare to the networks which use the PoS. Here the high energy is consumed in mining process and block generation process.
Block size is also small. The ethereum network use the PoS and PoW. Here the speed of the network is high because of the PoS. 15 transactions can be performed in one second on the network and block size is also large as compare to the bitcoin. No high energy is consume on the network because of the PoS.
Conclusion
The PoS is more efficient and fast as compare to the PoW. This protocol provide the solution of many problem which are there in PoW. The scalability problem which are in PoW has been solved in PoS. In PoW, the block generation time is very high. this protocol is slow and consume very high energy. Heavy machineries are required for the mining purposes. So this system is costly. But the PoS is less costly and more fast. This protocol do not consume the heavy energy. The block generation time is also less so this protocol is fast. Here the heavy machinery are not required. Multiple transactions can be perform in s single second. The security is not as much high in PoS as compare to the PoW but still the scalability and speed made the PoS more efficient and effective. between these two protocols, i will definitively prefer the PoS.
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