GREETINGS EVERYONE
QUESTION 1
(1) What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
My esteem greetings to everyone one in this great academy. It feels really nice been part of this very wonderful class and been a member of this great community. I am back again to submit my homework post on task-6 which is on the different types of consensus mechanism.
Coming to talk about record, keeping, the CONSENSUS MECHANISM is indeed the surest plug. Therefore, a consensus mechanism simply refers to a number of methods that is simply been utilized to come to an agreement, establish trust, and hence see to it that there is a standby security checks on the entire decentralized computer systems.
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Hence, in the consensus mechanism, there are two key factors to be considered and looked into keenly in the context cryptocurrencies and the blockchain system, these include;
- The PoS (Proof-of-Stake)
- The PoW (Proof-of-Work)
For the purpose of these homework post, these terms will be discussed in details in the subsequent paragraphs below.
The PoW which is an abbreviation which stands to mean Proof-of-Work, is simply a system which needs/requires a lot of attention or a large amount (not-significant) of effort in order the discourage the malevolent use of the computing power which may include sending of spam phishing links.
Going on a historical lane, the concept of PoW has been first used by Hal Finney in the year 2004. Hal Finney who was a developer for the PGP cooperation happen to make use of the term in 2004 through the idea of "reusable proof of work". Not leaving behind that the term was first brought into existence/invented by Cynthia Dwork and Moni Naor in the year 1993 as a way to discourage services of attacks. Furthermore, Proof of work was on a later run made popular by the advent of Bitcoin which was a foundation for consensus in the decentralized network.
Furthermore, the PoW (Proof-of-Work) is simply a widely used in cryptocurrency mining which is used for creation of new token and validating transactions. Also, in the PoW, there is a requirement of a very high amount of energy which only increases as more miners join the network.
The proof of work is that which forms the basis for all cryptocurrencies. The Proof-of-Work has it purpose to be: it stands to prevent the occurrence of data manipulation via the establishment of high security protocols, or the establishments of specific solutions of larger amount energy and various hardware-requirements control.
In summary, the PoW is simply decentralized system where the miners are been able to solve the various puzzles given along side proving their work to other mining competitors. Together, the puzzle is been confirmed if true, and if it is then the miner who got it will be then given given the reward and along side a new puzzle will be released for the miners to solve.
Unlike the PoW where miners are rewarded for puzzle solving, in the PoS, reward is not received at the end of the day instead, there are been given what is called network fees as a form of reward.
Hence, the concept is simply an encouragement for miners to be able to hold coin for a very long period of time. Here, the miners been allow to mine or validate transactions in the block based on the number of stake been put in place. This can further be in it simplest term to be; the more coin a miner holds the more mining power the validator/creator tend to have.
It will be important to know that the proof of stake is simply an alternative that was put in place for proof of work.
By observation from the above explain terms, you will all agree with me that there are a lot of differences between the two terms. Hence those differences will be outline in the subsequent paragraphs below.
PoW (Proof of Work)
Large amount of energy is required which only grows as more miners join the network.
The reward is been given to the first person who was able to solve the puzzle given.
Increased frequency in mining gives the miner/creator more coins as reward.
In cryptocurrency, the proof of work is widely used for validation of transactions and mining new tokens.
There is secure transactions of cryptocurrencies through peer-to-peer due to the secureness of the decentralized network.
Increase in Monopoly over time
There is limit to how many new blocks is to be generated.
PoW (Proof-of-Stake)
The largest cryptocurrency which is BITCOIN only runs on the the proof of work not on proof of stake.
Unlike the reward collected in the proof of work, the reward collected in the proof of stake is Network Fee that is given to only selected validators.
High security network in the the PoW which makes it difficult for attackers to take advantage of the miners.
The PoW gives mining power to validators, based on the percentage of coin they hold.
Blockchain transactions can be validated by a miner based on the number of coin he/she holds.
In PoW a coin holder can as well handle Monopoly and power consumption.
ADVANTAGES OF PoW
Let start with Security: The system applied to PoS can be used to secure and protect entirely a network system. This can be prevention from various fraudulent activities that may hamper the entire blockchain and its users as well. Since there are larger amount of validators/mining machine working on simultaneously to solve a particular problem and hence finding solution to the problem. Hence, larger of amount of computation power will be needed to alter the network. This will therefore make it hard for individuals to perform an attack on the network.
Proof of Work do reward miner with block rewards and also share of transaction fees.
More decentralized networks also comes out as a result of proof of work.
Proof of work is system that is cost effective which makes its costly to attack.
Also, since the PoW requires high amount hard work for transaction processing, it therefore reduces attack risk.
DISADVANTAGES OF PoW
PoW of work results to long term break to mining as the newly minted cryptocurrencies near the cap.
There is immoderate use of energy: since there are usually a lot of extra computational work in puzzle solving, at that process large amount of energy are used.
For PoS to work/function effectively, some requirements are to be met such as, having a computer sets which will help optimize operations.
Large amount of calculations which can be done with the use of specialized and expensive computer hardwares.
Expenses grows without control, and mining becomes possible for only larger group of individuals.
ADVANTAGES OF PoS
Proof of Stake model do not require the large computational power as do the proof stake of work.
The rewards received in the proof of stake model rewards is better for those who are stakes cryptocurrency.
Also, the PoS serves better and faster since only cryptocurrencies are required.
The stimulus of the miner is only to maximize their profit.
DISADVANTAGES OF PoS
Unlike the PoW system which promotes decentralized network, the PoS sytem generally results to less decentralized network.
Low security level in the PoS model systems. This will lead to malicious attacks on the network with less cost effect.
Validation of transaction blocks is strictly based on cryptocurrencies. This gives less chances to other individuals with less financial aids.
Which one is better in scaling Capacity? Examples?
calling capacity which simply refers to the ability of a consensus mechanism to sustain higher number of occurrence/transactions over a period of time. Hence, the consensus mechanism which offers more transaction range
have a better scaling capacity.
From the conclusion drawn above, it is therefore the PoS which have a better scaling capacity. One of the reason why the PoS serves with better scaling capacity is that proof of stake offers interesting solutions to the puzzle asked/given. For sure guarantee fault tolerance, when talking of non-honesty, the Proof of stake using the Byzantine Fault Tolerance (BFT) gives guarantee on speed and consistency of transactions.
EXAMPLES OF CURRENCIES THAT USES PROOF OF STAKE
Bitcoin been the first cryptocurrency to use PoW. Since then, there are numerous/several cryptocurrencies that makes use of proof of stake. Below are some of those cryptocurrencies.
ALGORAND: It is a cryptocurrency which uses two-tier blocker to offer it users with the required amount of transaction speed. These speed is on the range of 1,000 per second.
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TEZOS: This is simply a programing blockchain designed with an on chain mechanism for adaptability. It is an open source blockchain that address the issues on the blockchain.
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A number of methods that is simply been utilized to come to an agreement, establish trust, and hence see to it that there is a standby security checks on the entire decentralized computer systems is simply what is called a consensus mechanism. The consensus mechanism has it types to be; The PoS and The PoW.
From the above, a conclusion is been drawn tha the consensus mechanism comprises of both the decentralized and Centralized mechanism.
I will conclude by saying a big thank you to prof. @sapwood for this wonder class.
I wish this meets the required standard of this homework task 6.
Best regard:@gi-de-on.
CC:
@sapwood