[Different types of Consensus Mechanisms] - Steemit Crypto Academy Season 4 - Homework Post for Task 6 by @lhorgic
- What is the difference between PoW & PoS?
- Avantages and Disadvantages?
- Which one is better in scaling capacity?
The PoW and PoS are both consensus mechanism but for us to clearly spell out the differences, I will have to take out time to explain so that we can understand these concensus clearly.
Consensus Mechanism
Consensus mechanism can be defined as a way of reaching an agreement on a network and the agreement should be reached by more than half (usually above 50%) of the nodes in a system. it is communal in nature, that is no one takes decision alone like a centralized system where everything is carried out by a central authority. Consensus mechanism is prevalent in the blockchain system and this helps maintain the security, transparency, and free flow of activity on the blockchain. I will also like to mention at this point that we have different types of concensus mechanism which includes;
- PoW
- Pos
- DPoS
- PoB e.t.c
For the purpose of this task we will be looking at just the PoW and the PoS
Prof of Work (PoW).
PoW which is also known as the proof of work mechanism and in this type of concensus mechanisms energy and effort are channeled into the minning of blocks. It is called a proof of work because miners must proof that they actually did a work.miners are known to solve solve some complex mathematical problems or puzzle using some hash function before a block can be successfully mined and when such block is mined,the miner is rewarded for his labour and then new block is then added to the blockchain . The miners provide everything needed to keep the blockchain running especially the computers and energy needed, they also function as watchmen in the blockchain, preventing hackers from invading the system.This mechanism is also used to confirm transaction and also prevent issues like double spending. it is important to mention at this point that one of the prominent cryptocurrency that uses the PoW is Bitcoin.
Proof of Stake (PoS)
PoS means proof of stake, this is a system that reward miners who are referred to as validators in this concensus mechanism based on their level of holding in the blockchain and not necessary the computing work carried out by the miners. It therefore means the larger the holding of a miner, the more he is been likely to be oppotuned to mine the next block. It is also important to mention that PoS uses random algorithm in forming it consensus, that is not to over rule the fact that the highest holders get the highest probability of being selected to mine the next block, it is just that there are other considerations before the selection is made.
What is the difference between PoW & PoS?
| PoW | PoS |
|---|---|
| Consumes more power in mining process | Consumes less power in validation process |
| Equipment for mining are very expensive | you don’t need those expensive equipment to become a validator |
| Block is mined based on the effort and volume of work done | The validation of block depends largely on the holding of the validator |
| Reward in this system goes to the first to solve a mathematical puzzle (cryptograph) | Reward in this system is given in form of fee to validators. |
| There is competition is this consensus algorithm among miner | There is no competition in this system, validators are chosen based on the level of staking |
| In Pow, ones initial investment is always on purchase of hardwars | in Pos, Ones initial investment is always on Staking and reputation building |
| Examples of crypto with PoW is the popular bitcoin and ethereum | Examples of crypto with PoS are EOS, Tezos (XTZ) , Cardona (ADA) Cosmos (ATOM), Lisk (LSK) |
Proof of Work (PoW)
| Adantages | Disadvantage |
|---|---|
| It has proven to be very sustainable, we can see that in bitcoin | It uses too much energy to keep the system running |
| It is very easy to set up when compared to PoS | You need sophisticated equipment to begin you journey as a miner |
| You don’t need token like Eth to startoff and this is unlike PoS | The prevailing need of computation might make the system centralized on the long run. |
| It is very rewarding after successfully setting it up in spite of it cost | It is expensive in setting up |
| Third party are eliminated in this system and this makes it very decentralized | Only few can operate as a miner unlike validators because of it cost |
| This concensus algorithm helps reduce the problem of double spending and other related issues | Transaction cost is high when compared to that of PoS |
| No one is given undue preference unlike the PoS that chooses those with high staking | Validation process of transaction is slow |
Proof of Stake (PoS)
| Advantages | Disadvantages |
|---|---|
| It doesn’t involve solving complex mathematics | investors with high staking has certain right which could be detrimental sometimes |
| There is no competition in this system | It’s still in it infant stage and so we can really tell how relevant it will be in years to come |
| We only have validators in this system and not miners who work their fingers | reward gotten here is less when compared to that of a miner |
| It has a very strong basis against becoming centralized over time unlike the PoW | Your staked coin or token are not easily accessed until a certain period of time after being locked |
| It scalabity and security level is high and appreciable | a particular amount of token is required to start off as a validator. |
| Staking is much more easier when compared to mining | It is not very easy to implement in most cases. |
Which one is better in scaling capacity?
Scaling Capacity
By scaling capacity we mean the ability of a concensus mechanism to carry out numerous transaction in a very short while. And with the comparison we have made so far about the proof of stake and the proof of work, we can see that the proof of stake is more efficient in carrying out a lot of transaction because of it confirmation process with is way much seemless compare to that of the PoW. Lets take a look at this analysis.
We have the ethereum as one of the leading crypto that uses the proof of work and it validate about 13 transaction per second
Solana (SOL) on the other hand that uses PoS mechanism processes “tens of thousand” of transaction per seconds with a very cheap transaction fee.
We can see from the analysis that the PoS mechanism is high scalable and recommendable.
Conclusion
Exploring this subject has really been worthwhile, indeed both leading mechanism has it advantages and disadvantages and we can say that they are both relevant in their own way, nevertheless you have to go for a concensus mechanism that best serve you.
Thanks so much for this lesson @sapwood and @dilchamo for making this homework task an enjoyable one.
Best regards:
@lhorgic
#club5050
Gracias♥️
#club5050 😀