Crypto Academy Season 3 Beginners' Course Homework Post For Task 4: Concensus Algorithm.
| No. | Contents |
|---|---|
| 1. | Differences between PoW and PoS |
| 2. | Advantages and Disadvantages |
| 3. | Similarities and Differences |
| 4. | Which is better in Scaling Capacity. Examples. |
Proof-of-Work
PoW was created by the Bitcoin founder Satoshi Nakamoto to ensure that Bitcoin gets easily accepted. It was created as a means to secure digital currency. This with thePoW algorithm , most of the Cryptocurrencies are secured. Bitcoin was the first coin to adapt to the inception before other coins joined in. It is used to ensure a Decentralized blockchain.
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How does PoW work?
Proof of Work is used by miners in adding new blocks and approve new tokens to get added in a blockchain. This is made possible by miners who work through the PoW process. Every 5-10 minutes, a miner introduce new blocks in the blockchain by performing some computations known as cryptography. It is a set of mathematical puzzles with combination of letters and numbers, which each miner must crack to get the answer and get the right computations earns his or herself a bitcoin, this reward serves as a good motivation for miners to keep going.
Advantages of Proof of Work
- Proof of Work was majorly created to a avoid the printing of extra coin by users on the blockchain. They want to reap where they did nothing to sow.
- They reward their miners after a successful approval of the mined coins.
Disadvantages of Proof of Work
- High Energy Consumption: Most coins especially Bitcoin and Ethereum consumes much energy even more as miner inrease in the blockchain.
- Adopting Centralized System: PoW is all about a single currency that controls the blockchain contrary to the need of a Decentralized system.
- High Insecurity: It is prone to attack by miners and some who despite its formation still double print their money.
Proof of Stake
An alternative to PoW was created in 2012 by Scott Nadal and Sunny King with the idea that a person's power is validated by how many coins they own and mine. In other words, the higher the coin ownedz the higher the power a miner have. Peercoin was the first cryptocurrency to be introduced in the PoS
Advantages of Proof of Stake
- Proof of Stake maintains its Decentralized nature.
- It consumes less energy than proof of work.
- It is less expensive in its transaction. Sophisticated equipments are not necessarily needed to crack a problem
- It is more secured than Proof of Work.
Disadvantages of Proof of Stake.
- It favours only the rich as they have money to purchase more coins and gaining more power and recognition in the blockchain.
- It is prone to attack.
*They reward only the first person that is able to decode the puzzle making it seem like the efforts of others are not recognized.
Similarities between PoW and PoS
- Both PoW and PoS are Concensus Algorithm which is a necessity to approve any transaction that takes place in a blockchain without the interference of a third party.
- Both goes through a mining process to approve and verify a coin before it is added to a blockchain.
Differences between PoW and PoS
- PoW is the original consensus algorithm created in the blockchain technology before PoS was created as an alternative.
- PoW consumes much energy leaving its users high and dry after consuming majority of their earnings. PoS rewards a miner based on the number of coins they own
- PoW is highly exposed to attack
How does it work
Just like PoW, each miner must solve a computation puzzles which is gotten from PoW, but the difference here is that the first person to solve the problem is rewarded a coin and once the transaction of the block is approved by the blockchain system, it is added to the blockchain.
Scalability Capacity
Scalability is the ability of a blockchain network to attract and maintain a high number of transactions in its blockchain. PoS is seen as the Concensus algorithm with a better scalable capacity because projects I PoS have sought for ways to tackle the scaling issues that PoW could not achieve by providing better and adequate process with less expensive computations technology, less bandwidth energy usage and better storage status.
- It maintains its Decentralized nature, this giving it's users freedom to voice their opinions in the blockchain.
- PoS is based on a Byzantine Fault Tolerance (BFT) which provides a better and clearer scaling solutions.
- PoS validators are given the chance to decide and vote on if a block should be part of a chain.
- The major issues of energy consumption is tackled since they offer less energy for each transaction that takes place.
The coins that operate with the Proof of Stake algorithm are Dash (DASH), Neo(NEO)
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