Proof of Work (PoW) vs Proof of Stake (PoS) in blockchain - Which One Is Better? Part-1
Proof of Work VS Proof of Stake
not sure what's the difference between the two? Learn what's the difference between Proof of Work VS Proof of Stake.
Recently you might have heard about the idea to move from an Ethereum consensus based on the Proof of Work (PoW) system to one based on the so-called Proof of Stake (PoS).
In this article, I will explain to you the main differences between Proof of Work vs Proof of Stake.
Both of these models are called 'consensus mechanisms', and they are a current requirement to confirm transactions that take place on a blockchain, without the need for a third party. We'll get more into this soon though.
Anyway, in this Proof of Work VS Proof of Stake guide, I am going to start by explaining the basics of each model, followed by which popular blockchains have adopted them.
Following that, I am then going to give a really simple explanation about how the technology works and how they allow people to earn extra cryptocurrency by becoming a miner!
Finally, I will then explain why I believe Proof of Stake is a much better model than Proof of Work, as well as giving some real-world examples of each model.
By the end of reading my guide from the start to finish, you will be able to comfortably explain to your friends what each consensus mechanism is, how they work and which one is better!
This post will only cover the basics explaning the rest in coming articles.
Proof of Stake VS Proof of Work: The Basics
When Satoshi Nakamoto was building the first-ever cryptocurrency, Bitcoin, he had to find a way for transactions to be verified without the need to use a third party. This he achieved when he created the Proof of Work system.
Essentially, Proof of Work is used to determine how the blockchain reaches consensus. In other words, how can the network be sure that the transaction is valid and that someone isn’t trying to do bad things, such as spend the same funds twice?
Although I will explain it in more detail later on, Proof of Work is based on an advanced form of mathematics called 'cryptography'. This is why digital coins like Bitcoin and Ethereum and called 'cryptocurrencies'!
Cryptography uses mathematical equations that are so difficult that only powerful computers can solve them. No equation is ever the same, meaning that once it is solved, the network knows that the transaction is authentic.
Lots of other blockchains copied the original Bitcoin code and as such, also use the Proof of Work model. Although Proof of Work is an amazing invention, it is anything but perfect. Not only does it need significant amounts of electricity, but it is also very limited in the number of transactions it can process at the same time.
As a result, other consensus mechanisms have been created, with one of the most popular being the Proof of Stake model. Proof of Stake was first created in 2012 by two developers called Scott Nadal and Sunny King. At the time of its launch, the founders argued that Bitcoin and its Proof of Work model required the equivalent of $150,000 in daily electricity costs.
In PoS, computational power is replaced by currency power. It depends on the number of tokens a node has in its wallet. In other words, your ability to validate a transaction depends on how much ‘stake’ you have in the network.
It’s worthwhile to note here that there will be no ‘miners’ in the PoS system. Instead, there will be validators or forgers. Why? Because there will be no block rewards but only the transaction fee. Moreover, new coins will not be mined. Instead, they will be produced by the creators at the time of launching the network. This number would never change.
Since then, this figure has increased to millions of dollars, which I will discuss in more detail further down this article.
Anyway, the first-ever blockchain project to use the Proof of Stake model was Peercoin. The initial benefits include a fairer and more equal mining system, more scalable transactions and less reliance on electricity.
As a result, the world’s second most popular cryptocurrency – Ethereum, is in the process of attempting to move from Proof of Work to Proof of Stake. The Ethereum Proof of Stake date is yet to be confirmed, however, the team is working hard to get there as quickly as possible.
So, now that you know the basics, the next part of my 'Proof of Work VS Proof of Stake' guide is going to look at which blockchains have / are adopting each of the two models!
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