HELLO EVERYONE,
Hope you all are doing well. My name is Syed Huzaifa and I intend to write about Different types of Consensus Mechanisms today. I'll be particularly focusing on PoW and PoS. This is Crypto Academy Season 4 Beginners' course - Task 6 homework post assigned by @sapwood. Let's move on to the topic.

Homework post 6

What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?

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Proof Of Work:

Proof of work is a consensus mechanism used to make the transaction valid. It's like a complex mathematical problem solved by the computer for making the transaction successful. PoS is like an algorithm used for the confirmation of transaction and(Image source)then it create and add a block to the chain.

When a transaction in the blockchain takes place, it enters a pool that is not verified. The task for validation and verification of the transaction is given to a miner. A transaction that has been verified is added to the chain with the current and previous timestamp.

The speed of the transaction depends on the creation of the block per time of that network. PoW is bounded by scaling capacity and is energy inefficient.

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Proof Of Stake:

PoS stands for Proof Of Stake. PoS is also a Consensus(a general agreement) mechanism just like PoW with a few differences. PoS is also used as a verification method for a different network in cryptocurrency. In proof of stake, the owner put their tokens as a guarantee (Image source) and in return, they get the percentage of the amount they have a stake. It's like an interest bearing on a saving account in banks.

In PoS, the higher the amount an individual has staked the more chances are there for him to be a validator. PoS is an energy-efficient mechanism as there is no requirement for the mining rig.

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Difference Between PoW and PoS

source

Proof Of Work	Proof Of Stake
PoW completely works in a fully decentralized system	PoS is more likely to be centralized as a user with more staking tends to be a validator.
PoW limits scalability and is slower than PoS	PoS is much faster when it comes to verification of a transaction.
PoW is energy inefficient	PoS is energy efficient
PoW uses a mining process for the validation of transactions	PoS uses the coin to be stake by the owner(validator) for the validation
PoW reward a miner for mining a new coin every time	PoS works more like a bank and gives a percentage of the amount being staked by a validator

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Advantages Of PoW:

• Algorithms for Proof Of Work is simple and it provides a great mechanism for an agreement.

• PoW works on a decentralized system which means there is no third-party involvement for the authentication of transactions.

• The notable advantage of PoW is it depends upon computational abilities.

Disadvantages Of PoW:

• Energy is wasted in PoW which is the main disadvantage that can't be neglected. The computer performs a lot more computational efforts resulting in a waste of electricity.

• Reward system increases the number of the newly minted coin in the blockchain.

• PoW charge a high transaction fee if they are in pending verification.

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Advantages Of PoS:

• The energy efficiency is much better than that of PoW, there is no need to use a lot of energy for mining blocks.

• Lower need of computation reduces hardware requirements, which effectively reduces the cost.

• PoS offers fast transactions.

Disadvantages Of PoS:

• Once a coin is staked, it's impossible to retrieve it until it completes its time.

• PoS mechanism is not too old and also less secure than PoW.

• Reward for staking is less than the reward earn by mining.

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Which one is better in scaling Capacity? Example?

Scaling capacity or scalability is the ability of a cryptocurrency to tackle several transactions at a time.

After going through the lecture, I can conclude that PoS is better than PoW concerning scaling capacity as PoS gives the fast speed of transaction per time than PoW.

Example:

Here are few cryptocurrencies that use PoS instead of PoW:

1. Cardano (CRYPTO:ADA):

Cardano is a trending cryptocurrency that uses a consensus mechanism like PoS, having its token known as ADA. Anyone in the Cardano blockchain can stake it and can set up their validator node. When blockchain needs to verify a transaction, a validator (Image source) is selected for that purpose.

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2. POLKADOT (DOT):

Polkadot also uses a Proposed Proof of Stake system where one can nominate a validator on Polkadot. An individual can nominate a validator who helps them earn a reward in DOT. Image source

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Conclusion:

In the world of cryptocurrency there are some methods to verify a transaction, some of which are defined in this homework post namely:

• Proof Of Work(PoW)
• Proof Of Stake

We further discussed the pros and cons of both mechanisms.
This post also contained some of the cryptocurrencies that are using the PoS mechanism.

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I hope you like today's post and learn something new. Take care, Goodbye.

Regards,
@syedhuzaifa123.

Cc:
@sapwood