Different types of Consensus Mechanisms - Steemit Crypto Academy Season 5 - Homework Post for Task 6 by @pratikjumle29
Hellow Everyone on Steemit! I hope you all achieving your goals. I'm Pratik Jumle from India and today through this post I'm looking forward to complete my homework on task 6 of season 5 Beginers Course (fixed).
I have read and studied the professor @sapwood's post on "Different types of Consensus Mechanisms" carefully.
Now, I'm writing my homework on the Question 1:
What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
What is the difference between PoW & PoS?
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Before proceeding to learn about the differences between above two mentioned terms PoW & PoS, we must learn what they basically are! Then can only we will be able to learn the differences between them and their advantages and disadvantages.
PoW:
We call proof-of-work in short "PoW" . Generally, Proof of Work is used to describe a system which requires computational efforts for the completion of a task. But in case of Cryptocurrencies we can define PoW as a decentralized system where miners somehow solves difficult mathematical puzzles through their computers for intention of being the first one to complete. In simple words it means that whoever minor succeeds to solve the puzzle first gets the reward in the form of some amount of cryptocurrency.
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In PoW, the miner who solves the given puzzle have to prove their work to the other cryptourrency mining competitors. All cryptocurrencies miners together verifies the solution, and if the solution is right the first miner with the correct solution gets the reward in the form of Cryptocurrencies. After this another new puzzle is given and the competition starts all over and repeats the same process again and again.
Because of PoW, it is very easy to verify puzzles answers and they are made public. Hence, we can say that each and every block in a PoW blockchain is a list of difficult though solvable mathematical algorithmic puzzles, in addition with several other bits of data present.
PoS:
PoS is a short form of "proof-of-stake", is also a consensus mechanism like PoW used in Decentralized blockchain technology. By this mechanism the new block validation process is determined by the amount of largeness of the stake of a person. It simply means that the miner is selected based on the amount of coins he own. So, we can say that the more amount of stake a person owns would determine the more chances and opportunity a person to become a validator. This mechanism works on the principle of on the more coin stake a person has , then he has more influence and mining power on the mining operation on blockchain.
Also note that the network chooses Random validators for the proposal of new Blocks.
Now as we got the basic idea's about what the PoW and PoS is, and how they work! i think we are ready to learn about some differences between them as follows:-
Difference between PoW & PoS:
| PoW | PoS |
|---|---|
| • In PoW miners have to spend a lot of energy because of computational work for solving complex mathematical algorithmic problems. | • In PoS one isn't dependable on energy. Only the amount of coin at stake is important. |
| • The first miner to solve the mathematical puzzle only gets the reward in the form of some amount of Cryptocurrency. | • In Pos reward is distributed in only some selected validators in the form of a network fee. |
| • In order to participate, the miners needs powerful computer hardware as well as a high power energy supply which must be stable. | In PoS we one only needs tokens to stake. |
| • PoW is secured because of the high computational cost, as the cost of spamming will never be more than the profits earned from the spamming. It is very costly to buy the computer with high quality assets as well as the supply of energy isn't cheap. | • PoS is Also secure because of one's difficulty to buy more than 50% of the total tokens which are already staked. |
| • The more frequent you become in mining the more rewards you earn as coins. | In PoS you get network fees as a reward so no increase in coins. |
| • PoW is slow in operation as compared to PoS. | Whereas PoS is more faster than PoW. |
So, This were the some differences i learned about PoW and PoS!
Advantages and Disadvantages of PoW & PoS:
Below i have discussed some advantages and disadvantages of both PoW & PoS.
They are as follows:
Advantages of PoW:
High Efficiency and secure.
In PoW validation process of a transaction can be done without any kind of unwanted interference of third party.
Due to its strong mechanism It can't be misused in the blockchain.
Also, the best advantage of this mechanism we can say is it keeps scammers away because its operations depends on computation capabilities whose cost is more high than tye benefits the scammers want to gain.
Moreover, PoW is Decentralized so this system isn't dependent on a third party for its transactional operations. Due to this we can say that it is a very transparent network to use.
Disadvantages of PoW:
For PoW miners needs to solve complex cryptographic puzzles for mining operation in order to validate next block,this is most hectic and time consuming process.
PoW process is very slow and it consumes more energy supply and with respect to its high cost.
For PoW a miner requires very powerful computer with quality equipments updated with latest advanced software programs to solve the complex algorithm for PoW.
Also the miners needs to deal with the high cost of maintenance of whole system used in mining operation with very high consumption of electric supply, due to this PoW blockchain has to face scalability limitations, leading slow down the speed during transaction.
If the miners have a very small network, their is a possibility of hackers getting control over a large proportion of the computational power of network. It can might lead a hacking attack on the network.
Advantages of PoS:
In PoS we need less electricity and energy for the work purpose.
More scalability.
Since their is a very low amount of investment, and less equipped computor needed in PoS it opens opportunities for everyone with free entries.
In PoS, transactional operations are more cheaper and faster.
As in PoS one needs to stake the coins to gain maximum rewards , It will result in increased in the demand of Cryptocurrencies on the blockchain.
Using PoS will result in the stability of Cryptocurrencies prices as everyone will prefer to invest in the staking of coins.
PoS can results in more decentralization, since it can operate on cheap equipments resulting in increase in the numbers of users. And as we all know that, the more the number of users, the system becomes more decentralized.
Disadvantages of PoS:
The biggest disadvantage of this system is that it doesn't support small investors as the ones mining power and ability depends on the amount of stake of coin held by miners hence resulting in the disadvantage for investors with very little stake.
Staked coins can't be transacted till they are unstaked. And the process of unstaking is done after a specified period only.
Moreover, the PoS is new so its security is still not proven ; as less computational work is required!
Which one is better in scaling Capacity?
We can define scalability as the limitation on blockchain to for processing several transactions. In other words, the capability to support imminent rise in load of transaction.
As we all got the basic idea of what scalability is, now it is more easier to pick between this two whos scaling Capacity is better.
Hence, Now we can say that Proof of Stake (PoS) have better scaling Capacity than proof of work (PoW) because it is very faster in operation and also works on very low energy consumption rate. PoW is very costly and requires alot of hardwork and also they consume much energy and slower in speed as compared to PoS. Whereas, PoS is quite efficient and have the capability of processing thousands of transactional operations very fastly that PoW.
Examples of PoS
Bitcoin (the first Cryptocurrency) operates the principle. But nowadays some some of the cryptocurrencies are following the principle of PoS. While some cryptocurrencies switched their working principle from PoW to PoS. For example, Ethereum.
Some examples of Cryptocurrencies which works on PoS:
Neo :
Neo is the first Chinese open source project on blockchain. It was formerly known as Antshare. It operates on the consensus mechanism of PoS. Its currency exists on the Neo's blockchain. Also, it has one more Crypto token which can be stake called as "GAS".
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Cardano :
Cardano was designed as a more efficient alternative to PoW networks. Its primary Cryptocurrency is called as "ADA". It was designed Cardano is a third-generation, decentralized proof-of-stake (PoS) blockchain platform designed to be a more efficient alternative to proof-of-work (PoW) networks.
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As of June 20, 2021, 71.59% of Cardano's cryptocurrency ASA, is staked in 2,626 active pools with a value of approximately $31.4 billion.
Source
ETHEREUM (ETH 2.0) :
ETH 2.0 is a cryptourrency which shifted its consensus mechanism from proof of work (PoW) to proof of stake (PoS). Because of the drawbacks of PoW. And PoS provides faster transaction at lower rate with operating on less consumption of energy. As per today ethereum network is one of the popular and most demanded blockchain network present with network today with more than 2800 DApp built over it.
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Nowadays there are alot of Cryptocurrencies that are on the path of following PoS mechanism than PoW because of its drawbacks than are easily overcomed by PoS.
Conclusion
In this lecture i have learnt about different consensus mechanisms used in performing transactional operations such as, The proof of stake (PoS) and the proof of work(PoW).
Some cryptocurrencies follows the traditional pattern PoW mechanism like bitcoin while some cryptocurrencies are switching over to PoS for example, Eth 2.0. Because of its various advantages and more efficiency than PoW.
In the end i just want to thank professor @sapwood for his wonderful lecture on different types of Consensus Mechanisms. Because of this lecture i got the basic idea of PoW & PoS and now I'm able to derive the differences Between both of them.
Thanks for Reading!
Regards
@pratikjumle29