Crypto Academy Season 3 Beginners' course - Homework Post for Task 4: [CONSENSUS MECHANISMS] by @thimalteb for Sapwood

Homework Task 4

• Questions to be answered

What is the difference between P0W & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?

Before start proceedings, I would like to present a brief description of Proof of Work and Proof of Stake.
Data stored in a block should be verified before continuing a transaction. So, there are several algorithms that can verify a block which is called consensus algorithms. That is where the POW and POS come into their respective actions.

POW (Proof of Work)
To validate a p2p transaction or to add transaction data to a public ledger, there are thousands of computers that fight, and the machines with more power will have the chance of solving the cryptographical equation and add data to a new block. Not only that, but the winners will be also getting miner rewards according to their respective power. This is called mining and the people who are involved in this process are called miners. These decentralized algorithms which use computer power to create and maintain blocks are known proof of work (POW).

Source

POS (Proof of Stake)
This is mainly designed as an alternative to POW which will never use computer power to solve cryptographical equations, in here 1 node will be randomly taken to validate a block while considering the size of the stake of a respective validator. So, because of that, the validators have to stake a certain number of coins for a certain time period. So, this process will help to earn a passive income because after selecting a validator, the validator will get his reward as a transaction fee. So, this process is called POS.

Source

Differences between POW and POS

Source

Proof of Work	Proof of Stake
Pow has miners	POS has validators
Uses high energy as everyone is trying to mine new blocks	Uses less energy as one node will take the control of the system.
More decentralized, mostly because of the mining pools	More centralized
First consensus algorithm that is used in the blockchain network	Found as an alternative for POW
Rewards will be varying according to the computer machine power which solves the cryptographical equations	No reward will offer, but a transaction fee will be given according to the number of stake coins.

Advantages OF POW

• As, POW is more extra decentralized, it is a hard thing for the hackers to take control of the network. Also, it needs 51% of network computer power to hack/take control of the system.
• As the system is decentralized, anyone on the platform can join the mining process.
• Miners will get rewards that will be varying according to their machine power, which solves cryptographical equations.
• Through POW, it gives assurance for the accuracy and the reliability of the transactions.

Disadvantages of POW

• POW consumes a lot of energy; thus, it will definitely affect the environment.
• AS the system needs more power, more personals’ involvement will be needed. Not only that there will be a beneficial cut due to the increase of manpower.
• POW needs to have good knowledge and good experience to solve cryptographical equations.
• Maintaining the cost will be added to repair the computers.

Advantages Of POS

• As the system does not need the computer or machine power, this consumes less amount of energy
  No need for high experience and knowledge. The only thing to do is to be a part of the staking process.
• Can gain passive income according to the respective stakes.
• As the machines used in the POS system are significantly low, maintenance costs could be neglected.

Disadvantages of POS

• As the system is decentralized, the security of the system is low. As a result, there is a possibility of suspicious attacks.
• High investment is needed to actively participate in the system.

Which is better for scaling capacity?

POS is more scalable than the POW. Mainly POS came into the action, in order to fulfill the mistakes of POW.
In a nutshell, most importantly POS consensus is proven to be cheap rather than POW. High power consumption of powerful machines of the POW system was avoided through the POS. The mainly rapid spread of environmental pollution was reduced in significant numbers. In this consensus protocol of POS, make sure that the previous issues of transaction speed and accuracy will not continue further. Also, not like POW, Pos allows thousand of transactions within a second.

Pos Consensus cryptocurrencies

• Ethereum
• Cardano
• Dash
• TEZ
• NEO
• Peercoin

Source

Source

This is my homework task 4 for the season 3 beginners course. Thank You @sapwood for giving us the opportunity to learn these valuable lessons.

Thank You!!!
Be Safe!