Good morning, hope your night was great? Today I won't waste much of your time hence the homework task is very simple, I will try and explain it in a very simple way.
What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
What is the difference between PoW and PoS
To understand the differences between Proof-of-Work and Proof-of-Stake, we must first understand their definition and how they work.
Proof-Of-Work simple refer to a type of consensus algorithm in which miners (using their computer) solve a complex mathematics puzzle to validate a transaction on the blockchain and in return they are rewarded with the cryptocurrency, while Proof-Of-Stake on the other hand refers to a type of consensus algorithm in which miner are randomly selected to validate transactions on the blockchain and in return they are rewarded with the cryptocurrency provided that the miner stake some of the cryptocurrency, and also the reward will be based on the amount of the crypto currency staked by the miner, the higher the stake the higher the reward.
Since we have understand how Proof-Of-Work and Proof-Of-Stake works, let talk about some of the difference between them.
| Proof-Of-Work | Proof-Of-Stake |
|---|---|
| The node needs to solve complex mathematics puzzle to be rewarded | The node only need to stake his/her cryptocurrency to get rewarded and the reward also depend on the amount the miner staked |
| It's very costly has it requires power computer machines | It's less costly has it doesn't require any computer machines |
| The first node to validate the block are rewarded | They nodes are randomly selected |
| The energy consumed is very high | The energy consumed is low |
Advantages and Disadvantages
Advantages of Proof-Of-Work
Proof-Of-Work is costly making it difficult to get attacked by hackers
Proof-Of-Work is secured and the system can be trust
In Proof-Of-Work, nobody can cheat the system because the work put into solving the mathematics puzzle does not affect a miners’ chances of completing the current or future mathematics puzzle.
Disadvantages of Proof-Of-Work
The process of Proof-Of-Work requires a large amount of Power.
The nodes with better computing machine that are able to solve the puzzle quickly are rewarded this automatically favor the rich that have money to buy the computer equipment
- Proof of work need excessive energy usage, resulting in higher costs and negative effects on the environment.
Advantages of Proof-Of-Stake
- Proof-Of-Stake is more energy efficient as it doesn't requires computational power.
Proof-Of-Stake further reduces the possibility of centralization by removing the need for economies of scale.
Another advantage of Proof-Of-Stake is that it offer better rewards for nodes that stake their cryptocurrency .
Disadvantages of Proof-Of-Stake
- The person with the highest stake get more reward and this doesn't favor the small stakers
- Proof-Of-Stake are often insecure and vulnerable to low-cost attacks.
Which one is better in scaling Capacity? Examples?
I will like to quickly gives the definition of scalability.
Scalability is the ability of a system to be able to accommodate or handle numerous transaction running on it at a time.
The Proof-Of-Stake is better in term of scaling as it has it took less time to validate transactions on the blockchain and can handle numerous transaction at a time compare to Proof-Of-Work.
For example, Cardano (ADA) uses the Proof-Of-Stake to validate the transactions on its blockchain and it has the ability to handle up to 1000 TPS (Transactions per second) while Bitcoin which uses the Proof-Of-Work can only handle 3-7 TPS (Transactions per second).
I also create a table listing the cryptocurrency that uses Proof-Of-Work and the ones that uses Proof-Of-Stake
| Proof-Of-Work | Proof-Of-Staked |
|---|---|
| Ethereum (ETH) | Tron (TRX) |
| Dogecoin (DOGE) | Ontology (ONT) |
| Litecoin (LTC) | Algorand (ALGO) |
| Monero (XRM) | Cosmos (ATOM) |
Conclusion
The Proof-Of-Work works in a way that the nodes needs to use some powerful computer machines to solve complex puzzle to be able to validate transactions on the blockchain while the Proof-Of-Stake is different as it requires only the stakers of the cryptocurrency to validate the transactions, the nodes that validate in both mechanisms get rewarded but incase of the Proof-Of-Work the node with the highest stake get the highest amount.
The Proof-Of-Stake is more scalable as it can process numerous transactions faster than the Proof-Of-Work.
Sincere gratitude to professor @sapwood for this great lecture