What is the difference between PoW and PoS?
Proof of Work (PoW) and Proof of Stake (PoS) are two common terms when mentioning the cryptocurrency market. However, not everyone who is interested in cryptocurrency can understand the true meaning of these two protocols. Let’s find out with Brick!
What is Proof of Work (PoW)?
Proof of Work (PoW) in the cryptocurrency world is an important way to validate coin transaction status and asset management. As an earlier method, it has been augmented by others such as Proof of Stake.
The idea with Proof of Work is that miners will use proof of work systems to show verification. Bitcoin, for example, uses a hashcash Proof of Work system.
To understand Proof of Work, think about using a mining task as verification for a block. The system is able to validate coin asset creation through taking in input showing the mining process. One of the downsides of Proof of Work is that it is energy intensive to produce. Partly for that reason, engineers have been contemplating other types of methods for verifying transactions, such as Proof of Stake, which shows various forms of ownership.
Advantages of PoW
Outside factor effect. With the PoW mechanism, the production and circulation of money requires external factors like power and hardware. It’s not possible to get the expense of power or production of hardware back. Why this is important will be explained in the PoS section below.
It’s simple to pool mine. It’s easy to just grab another computer’s calculated hashes, combine them into one big pool of hashes, and have many computer hashing together, splitting the profits.
Disadvantages of PoW
PoW isn’t possible on smaller and weaker devices like smartphones. Not only do these devices lack the space to store hundreds of gigabytes of blockchain data, but they’re also not computationally powerful enough to mine effectively. The battery would be emptied very quickly, not really accomplishing anything.
PoW mining is slow. With Bitcoin, it’s one block every ten minutes, and transactions that fit inside that block will be processed. Anything else has to wait for the next block. This causes long waiting periods or expensive transactions (those that attach a higher transaction fee are processed faster).
PoW is already spending enormous amounts of electricity. Simply mining a single block costs more electricity than some countries need in a whole year. This will only get worse. The dependence of a cryptocurrency on electricity is unsustainable in all but the most stable environments. This dependency also means that a more expensive electricity bill or a government — imposed limit to the types of spending electricity can be used for can stop an entire cryptocurrency.
Because the block reward keeps decreasing, miners keep getting fewer and fewer tokens of a mined blockchain. At the same times, as more people are mining, the mining difficulty increases, so it gets harder and harder to mine. This makes mining more and more expensive compared to profits, and fewer people bother with it, exiting the system. The currency self-sabotages. Less hashpower among the miners also makes the 51% attack more likely.
What is Proof of Stake (PoS)?
Proof of Stake will make the consensus mechanism completely virtual. While the overall process remains the same as Proof of Work (PoW), the method of reaching the end goal is entirely different. In PoW, the miners solve cryptographically hard puzzles by using their computational resources.
In PoS, instead of miners, there are validators. The validators lock up some of their Ether as a stake in the ecosystem. Following that, the validators bet on the blocks that they feel will be added next to the chain. When the block gets added, the validators get a block reward in proportion to their stake.
Advantages of PoS
- Speedy processing of transactions.
- Contrary to POW, not harm to the environment.
- Not vulnerable to a state attack: no need for enormous amounts of electricity.
- Can be performed on smaller and weaker devices because there’s no need to download the whole blockchain, and since there’s no need for much computational power either, can be easily adopted by the mainstream.
Disadvantages of PoS
No external factors: Given that the stake is a part of the system itself, the whole game is internal. This means that someone with enough money to invest exclusively into the destruction of this system can do so by investing only money, as opposed to Bitcoin, where they need to invest money, time, expertise, hardware, electricity, and more — all external factors.
The rich get richer: Those who have had their Ether the longest (the age of the Ether in an account is as much of a factor as the amount is) also have the best chances of becoming validators. This means their chances to earn more Ether on top of their existing pile also increases. This is different from Bitcoin’s “rich get richer” system because there, the rich have to keep investing in hardware and knowledge to remain competitive. It also hurts more to sabotage the network.
Brick explained to you the basic differences between Proof of Work and Proof of Stake — the two consensus mechanisms. Hopefully this information will help everyone. Good luck!
(Source: Collected)
Please follow us to update latest news and knowledge:
- Facebook: https://www.facebook.com/brickglobal/
- Twitter: https://twitter.com/brick_global
- Telegram: https://t.me/brickglobal
- Medium: https://medium.com/brickglobal
- Website: https://brick.global/
- Youtube: https://www.youtube.com/channel/UCmCAtTZHdl486WAV76V_0_w/featured
