Crypto Academy Season 5 Beginners' course - Task 6: Different types of Consensus Mechanisms by @yakeen20
INTRODUCTION
Question:-
(1) What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
What is the difference between PoW and PoS?
Consensus mechanism is what is used in protecting blocks on a blockchain. Consensus mechanism is very vital in blockchain network since they play a very important role in terms of vadliation and verification of blocks on the blockchain. There are several types of the consensus mechanism, and I would be discussing two types in this article. Without much ado, we go straight to the work.
Proof of Work
Proof of Work (PoW) is the first ever consensus mechanism to evolve, and it involves the operation of many miners in verifying and validating transactions on the blockchain through the solving of mathematical puzzles. Miners are being rewarded after verification and validation of transactions. Proof of Work also involves the use of high power computers in mining by solving the mathematical equations. In PoW, the highly efficient computers verify transactions faster and quicker and thus generates the blocks.
Examples of blockchain networks that uses PoW include; Bitcoin, Litecoin, Ethereum, etc.
Proof of Stake
Proof of Stake (PoS) refers to the consensus mechanism that involves the validation of block transactions based on the amount of coin one has. This method allow users to stake their assets or currencies in order to mine a block to verify a transaction. In Proof of Stake consensus mechanism algorithm, the higher coin you hold or stake, the higher your chance of being able to verify and validate a transaction. This means that a person holding huge amount of coins has a higher or greater power over the one holding less coin.
Example of blockchain network that uses the PoS mechanism include; Lisk (LSK), Tezos (XTZ), Cosmos (ATOM), etc.
Difference between Proof of Work (PoW) and Proof of Stake (PoS)
Proof of Work (PoW)
PoW requires high computational power to function
Miners are rewarded after solving the mathematical puzzles
PoW requires high energy or electricity due to the use of high computational power in its functioning.
PoW awards the mine that first complete the mathematical puzzle
PoW uses the bitcoin cryptographic function, i.e. the SHA256 in its algorithm
Proof of Work is costly
Examples of blockchain networks that uses this consensus mechanism include, bitcoin, Ethereum Litecoin, etc.
Proof of Stake (PoS)
Proof of Stake requires the staking of more tokens for its function.
Users are rewarded in the form of a transaction or network fee
Proof of Stake does not involve the use of high electricity or energy because it does not involve the use of high computational power.
In Proof of Stake mechanism, users begin by staking tokens on the blockchain network in order to validate and verify transactions.
Proof of Stake is less costly because it does not involve the use of high electricity
Example of blockchain networks that uses this consensus mechanism include Tezos, Cardano, Cosmos, Lisk, etc.
Advantages of Proof of Work
Proof of Work provides a high level of security on blockchain platforms, which makes it difficult for hackers or fraudsters to attack the network.
Proof of Work mechanism protect users from double spending of coins due to the tight and strict verification process it uses.
Users or miners do not have to stake any token before they can start mining
Rewards that miners receive is quite encouraging and appreciable
Its system can be considered as decentralized
Disadvantages of Proof of Work
Proof of stake is very costly due to the high electricity required
It also requires a high computational power computer
Its process of verification of transaction is time-consuming
Its consume high electricity
Advantages of Proof of Stake (PoS)
Proof of Stake does not need a high computational power computer
Proof of stake is less costly and affordable
Proof of Stake ensures high security on the blockchain network
PoS has a higher scalability as compared to PoW
PoS is less energy consuming as compared to PoW mechanism
Disadvantages of Proof of Stake
The rewards of miners or stakers is biased because it depends on the amount staked, as a result, the rich rather becomes richer.
The verification process on multiple chains in PoS can grant way for hackers to make a duplex spend attack on the blockchain.
There is high transaction fee as compared to that of PoW
There is less security here as compared to PoW
The tokens or coins staked on the blockchain are not easily retrievable.
Which one is better stability capacity? Examples?
Scalability is referred to as the ability of a blockchain network to operate a huge number of transactions at a time. Between the two, Proof of Stake is the mechanism with a better scalability, and this is because it selects validators randomly for each round and the consensus is considered if the block would only be part of the chain.
Proof of Stake also makes it difficult for hackers to attack the system because of its method of operation. The PoS allows many transactions to be done at a time, unlike PoW, where it takes a long time before a transaction is verified. Ethereum is now building Ethereum 2.0 which supports Proof of Stake consensus algorithm to operate faster and more scalable.
Examples of cryptocurrencies that uses Proof of Stake Consensus Mechanism
Peercoin, Nxt, Blackcoin, ShadowCoin, Solano, Cardano, Cosmos, Lisk, etc.
The scalability of Solano is about 1000 transactions per second.
Conclusion
To conclude, I would like to briefly summarize what we have done so far in this article. First, we looked at the concept of Proof of Work and Proof of Stake. We also discussed their difference as well.
Furthermore, we looked at the advantages and disadvantages of both Proof of Stake and Proof of Work Consensus Mechanism. Finally, we looked at the one that is more scalable, and we saw to it that the Proof of Stake is more scalable as compared to that of the Proof of Work.
I would like to say thank you to professor @sapwood for such a wonderful lecture taught this week, and I look forward to participating in your subsequent homework tasks.
To the attention of professor @dilchamo
Thank You.