[Different types of Consensus Mechanisms] - Steemit Crypto Academy Season 5 - Homework Post for Task 6.
Homework Task 6
Question
What is the difference between P0W & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
As a start, I will first brief out what is Proof of stake and proof of work is. There are consensus mechanisms to legitimate the date in a block before a transaction is to be made. So, this proof of work and proof of stake is one of the consensus mechanism that is being used to validate the transactions of a particular block.
Proof of Work
This is a mechanism where computer power is coming into action. More the power, more the chance to solve the cryptographic equations/puzzles in order to validate and add data to a new ledger. In POW, there are cryptographic equations or puzzles which are introduced to its users to solve and get the chance to validate the blocks and also to add data to the blocks. Not only that, those who solve the equations will get rewards called “miner rewards”. So, POW is a computer power-based consensus mechanism which will aim to solve the cryptographic equations in order to validate the transactions made via a block in blockchain.
Proof of Stake
This is consensus mechanism where a miner is selected with reference to particular miners staked amount of coins. Here, there will be no use of computer power and the most important thing is that there are no miner rewards to be awarded for its users as well. Instead of that, the validators will be given network fee. Here the user who stake his/her coins for a certain period of time will have a chance to be selected as a validator based on the staked amount proportion.
| Proof of Work | Proof of Stake |
|---|---|
| To solve the cryptographic equations and for being selected for the mining process, high computer power will be needed | Stake amount of coins will be the only matter and not the computer power. |
| The user who solves the crypto puzzle firstly will get a miner reward. This is mainly in the form of cryptocurrency. | Reward will be awarded as a network fee. |
| As because of the mining pools, proof of work is meant to be decentralized. | Pow is meant to be centralized. |
| This is the first consensus mechanism to be found for the blockchain network. | This was invented as an alternative method and to overcome the mistakes of POW. |
| Network hackers need more than 51% of the computer power to add a block to the platform. | To add a block by hacking, the hackers will need at least 51% of the staked Crypto in the network. |
- As mentioned before, POW is decentralized and uses a large computer power, the security of the POW is higher comparatively, and no individual person can take control of the network without taking 51% of the mining machine power.
- Because of the decentralization feature the network will be independent from third party involvements. So, because of that, the transactions have a transparent background.
- Transaction accuracy and the reliability is also high. Because of that more and more uses are attracted to this platform.
- Miners will receive reward and not only that, as the system is decentralized everyone who is willing to join the mining process is warmly welcomed.
- Because of the competition between mining farms to solve the cryptographical equation, lots of energy will be consumed and that will directly affect to the environmental system.
- As because of the large mining farms and high-power computers, the maintaining cost and the labor cost is so high.
- Newcomers will need at least learn basic to participate in mining process and this will directly affect to slow down the new entries.
- This POS mainly depends on the staked coins and it does not rely on the computer power.So, because of that energy will be saved.
- As because of less equipment usage, the maintaining cost is less.
- Staking coins are the only requirement to be a part of the validating the transactions. So no such knowledge regarding the blockchain or the cryptocurrency will not be needed.
- Passive income is very much on the cards for the staked coins.
- More the staked coins, more the chance to select for the validation of blocks. So the users who don’t have much staked coins have no chance to participate in the validation process.
- As POS is more likely to be centralized, the security of system is not that much as POW. So, the hacker attacks are possible.
Scaling capacity is mainly based on the relationship between the number of uses Vs. transactions speed and number of transactions for a given period of time. In a nutshell, the consensus mechanism which has the ability to maintain the speed even after increasing of users and the consensus mechanism which has the ability do more transaction for a given time period, has the better scaling capacity. So, because of this POS has a better scaling capacity than POW mainly because POW will take some time to solve the cryptographic puzzles and there is no time consume for Proof of stake to solve equations like Crypto puzzles.
Ethereum
Every 12-13 seconds new blocks will be added to the Ethereum Blockchain and mainly Ethereum is the largest stake pool among the all the other networks. Not only will that, validators reward nearly 2Eth for validating the block. According to staking details more than 25 billion Eth is currently being staked by more than 200,000 validators.Source
Cardano
According to the staking details of cryptocurrencies, More than 700,000 stakers staked nearly 70% of Cardanos’ circulating supply.Source
Solano
According to the staking details of Solano, nearly 200,000 stakers staked more than 75% of Solanos’ circulating supply.
Source
Thank you professor @sapwood for giving us a good knowledge regarding the consensus mechanisms.