Crypto Academy Season 3 Beginners' course - Task 4: Different types of Consensus Mechanisms by @small-ville
What is the difference between PoW & PoS?
Advantages & Disadvantages?
Which one is better in scaling Capacity? Examples?
What is PoW
PoS or proof of work, is a consensus mechanism that requires a group of persons to mine or validate blocks of transactions using very high computing power. By doing so they receive mining rewards in tokens depending on how large their computing power is. The most notable cryptocurrencies that use this mechanism is Bitcoin and Litecoin.
What is POS
PoS or Proof of stake is a consensus mechanism that works by staking large quantities of that crypto so that the individual can be able to validate multiple transactions on the blockchain. The person in return receives mining rewards in crypto depending on how much the person staked. Most of the altcoins use this type of consensus mechanism they include Polkadot and Solana and Cardano.
Difference between PoW & PoS
- Sunny King and Scott Nadal were the creators of the PoS, while the PoW was initially created by Fredrick James Kelly and was later adopted by Bitcoin.
- The (PoW) proof of work needs a third party effort or resource to carry out validations on the blockchain which is a very high or large amount of electricity, while the PoS does not need a third party to do so. This is very dangerous because it makes the asset to be dependent on that resource(electricity), this could result in a dip in price when there is an unavailability of this resource.
- Another notable difference is that the PoW needs a large computing power, while the PoS needs a large quantity of the cryptocurrency to validate transactions and receive mining rewards.
- In terms of receiving mining rewards, with the PoW the individual is chosen randomly, while with the PoS the individual with the highest staking quantity receives the highest rewards.
Advantages & Disadvantages of PoW and PoS
| Advantages PoS | Disadvantages of PoW |
|---|---|
| Needs very low electricity consumption. | Needs a lot of electricity consumption. |
| Does not need large computing recourse. | Uses large computing recourses. |
| The transaction process is fast and so can handle multiple transactions per second. | Transaction process is slow, which make the amount of validated transaction per minute low. |
| You will need only a minimal investment into the crypto by staking it to see a sizeable profit. | A large investment into computing hardware and electricity would still give minimal yield. |
| It cannot be hacked because you would need up to 51% of the cryptocurrency to have a 51% attack impact on the blockchain which is nearly impossible. | The PoS is at risk of attack because it deals with computing hardware that could be attacked by Malware. |
Which one is better in scaling Capacity? Examples?
Scaling capacity is the ability of an asset to handle operational demands and still maintain positive growth. When it is applied to the two types of consensus mechanisms, I would say that each of them has its own significant disadvantages. But I feel that over time that the Pos would be more scalable, the reason this answer is that the PoW even though it has a lot of demand by the public in respect to Bitcoin, would overtime lose interest from the public because of its high demands for resources and slow transaction speed. The PoS could suffer from the nothing-at stake problem but this is very rare and it could be tackled easily. An example of scalability with the proof of stake is the time needed for a transaction. The proof of Stake processes transactions in seconds and also demands low energy consumption that is why the Ethereum founder Vitalik Buterin has proposed a switch to the PoS by the end of 2021, by doing so the PoS would solve the climate issues of Pollution and Illegal energy consumption.
Special thanks to;
@steemitblog
@steemcurator03
@steemcurator04
@cryptokannon
@sapwood