Moving Algorithm from PoW to PoS
Dear Hdac community members,
Hdac aims to provide various blockchain solutions and services that are necessary for the total ICT era through incorporating blockchain technology with the driving forces of 4th industrial revolution such as IoT, Big Data, and Cloud.
It is expected that the data integrity, irreversibility, and security that blockchain technology promises will have a significant influence on a hyper-connected society.
However, blockchain is still a developing technology. To further higher Hdac’s values through continuous development and to progress past our limits, we have started on developing a new PoS mainnet ‘Friday’.
Here, we will explain why Hdac is pursuing PoW to PoS transition. First, brief introduction to PoW will be made then we will give deeper evaluation on PoS.
PoW(Proof-of-Work)
Blockchain features decentralization and distributed processing, which means there is no central management. Therefore, there is a need for a method that will verify and manage the data inside the system. The method that verifies the validity of the blockchain network is called consensus algorithm. PoW(Proof-of-Work) and PoS(Proof-of-Stake) are the two main consensus algorithms.
PoW, in general, is a method that verifies whether one has participated in computing task finding a hash value that satisfies specific requirements based on data that is on each block header — the computing task is called mining.
In a PoW blockchain, participants endlessly repeat the procedure to find hash value. They compete with each other to earn more rewards. To get more rewards through mining, they put in enormous time and energy in solving computing tasks.
Also, if one particular group of miners take up a large portion of the ecosystem, there is a risk of contaminating the ecosystem disturbing the virtue of decentralization. In worst cases, few miner groups may come together to form majority and maliciously attack the ecosystem.
Also, because the reliability of the information is verified via consensus among multiple nodes, the process requires a certain amount of time. Therefore, there is a limit as to how fast and how much the algorithm can process.
PoS(Proof-of-Stake)
PoS is one of the public blockchain network categories which is based on stakes that a validator on network owns. Contrary to PoW where a reward is given according to the computing task, in PoS, rewards are given based on the values including stake, reputation, and professionalism.
Because the authority to produce blocks is given to those who own higher percentage, the interests of block producers and owners are aligned with each others’ interests. This implies that there is less possibility of block producers negatively influencing the profits of the entire ecosystem.
Advantages of PoS
Energy Efficiency
The most well-known benefit of PoS is that it requires less energy than PoW. PoS is not a competitive method like PoW, which uses numerous mining hardwares, spaces, and resources to secure higher hash power. PoS uses votes or verification procedure of votes to make consensus; it does not require miners to solve computing tasks and therefore solve the problem of a high amount of energy use.
Higher Security with Decentralized System
Another benefit of PoS system is that it is closer to the decentralization value of blockchain. As explained previously, on PoW system, malicious attacks by 51% majority is possible; however, on PoS system, it is unrealistic for one to own more than 51% stake, which means more decentralized and stable ecosystem can be maintained.
Strong Support on Incentive
Another drawback of PoW is that the interests of block producer and cryptocurrency owner may not align with each other. For example, miners can buy or sell cryptocurrency as soon as it is mined; therefore, they may show a tendency to focus on short-term profit instead of long-term values of the cryptocurrency.
‘Friday,’ the new blockchain Hdac has recently started to develop, is a PoS based blockchain. We aim to improve the weak points of the current ePoW, and by doing so, we expect to build a healthier ecosystem and to expand the use of blockchain in both public and private sectors.
The ability to secure faster processing speed and higher scalability compared to PoW will positively affect attracting DApp partners, and these characteristics of the system are more suitable for IoT environment and payment service in comparison to PoW. Thus, it is expected to influence various applications in general.
We will continue to construct a smarter world by providing reliable blockchain technology.
Any question or recommendation would be welcome on Telegram! There will be more updates and events announcement on the Medium blog for the Hdac community.
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