Crypto Academy Season 3 Beginners' Course - Homework Post For Task 4 (Different Types Of Consensus Mechanism) For @sapwood by @giftye

Being updated on the happenings in the world of cryptocurrencies, I have come across the word "mining" severally. At first it sounded strange to me until I went a little deeper into the subject. I must say,this lecture has really enlightened my understanding of these various consensus mechanisms, so I'm going to present my findings below in few words on the difference between two of these various consensus mechanisms, namely: Proof-of-work (PoW) and proof-of-stake ( PoS).

Using Bitcoin as a case study, although what I'm going to discuss is applicable to all coins which are mined through a PoW protocol. The PoW is basically a protocol designed to maintain security and prevent cyber attacks on it's network. This protocol also demands that you don't need any third party involvement to make transactions in sending and receiving money online, all the miner needs to do here is to verify the success of the transaction by recording it in the blockchain on a public ledger.

The PoW is particularly needed to solve exceptionally complex mathematical problems, and the process of doing this is what is known as "mining", which is useful in recording a new transaction in the chain of blocks. Each verified transaction is added to the block with it's timestamps (previous and present).

ADVANTAGES OF POW

• This protocol makes it very difficult and costly for cyber attackers to penetrate the network.
• PoW tends to reward miners in two ways:
  block rewards
  and
  a transaction fees share.
• It often functions in a decentralized network format at the end.

DISADVANTAGES OF POW

• It requires high level access to computational power which is mainly wasted whenever a complex problem is solved.
• It consumes excessive energy,making it expensive and hazardous to the environment.
• If a PoW blockchain has a small network,then it is susceptible to what is called a "51% attack"(this is done when hackers gain majority of the computational power of a network).

ADVANTAGES OF POS

• The proof-of-stake models do not consume much energy like PoW, therefore they are more energy efficient.
• Miners who stake their cryptocurrency stand a chance of receiving better rewards.
• With the POS there's no need to have a powerful computational strength to succeed.
• In the POS models ,blocks are validated by the acquisition of tokens, meaning a staker doesn't need to sell off some coins in order to foot some bills.

DISADVANTAGES OF POS

• POS have less security protocols and can be attacked through cheaper means.
• Here competition rises between users to see who has higher collateral.
• Incentive for all users are the same regardless of their difference in investments.
• Here,in order to make profits you must save your crypto,which gives no room for trading.

WHICH ONE IS BETTER IN SCALING CAPACITY? EXAMPLES

Source

I would like to start by defining scalability.

: This is a term that refers to the ability of a network to accommodate an increased number of transactions or occurrences.

BENEFITS POS ENTAILS IN SCALING CAPACITY

CONCLUSION

In conclusion, PoS has provided so many solutions to the scalability problems of Bitcoin. Issues like energy consumption and and slow transaction time has been tackled by this system which seeks to attain a consensus before blocks are formed. This allows thousands of requests to be processed per second. Proof-of-stake appears to be more complex because it doesn't demand resources as much as PoW does, especially with it's energy requirement. This has made people question it's potency and efficiency,but with clear understanding of the two systems you will find out that with PoW, scalability is not obtainable,while it is with PoS.