Sourse
Introduction
I will now perform this assignment by answering question 1.
(1) What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?
Before explaining the differences between PoW and PoS, I will give a brief definition of these PoW and PoS consensus mechanisms.
Proof-of-Work(PoW)
To maintain the blockchain with total security and validation, it is produced through an algorithm or consensus mechanism called proof of work PoW, which to date works efficiently, but at the same time requires a high expenditure of electricity because it uses high-cost hardware equipment. These mining equipment perform difficult mathematical algorithms to achieve a consensus and thus perform validations of the data or information stored in the blockchain, and of course it will be impossible to modify, change or delete the stored information.
Proof-of-Stake(PoS)
PoS is a consensus protocol that does not require specialized machines to perform the mining work, it does not need large amounts of electricity, this system provides the possibility for people who own amounts of coins can participate to be chosen randomly, to perform activities of selection and validation of transactions and also to create blocks in the blockchain network, of course they will have rewards for performing these jobs. All this allows PoS to have minimized power consumption.
The difference between PoW & PoS
| Proof-of-Work(PoW) | Proof-of-Stake(PoS) |
|---|---|
| This system requires very expensive computer equipment (hardware), these machines manage to solve complicated mathematical algorithms and also provide high security, but at the same time consume large amounts of electricity and we know that this does not benefit the environment. | Unlike PoW, the PoS protocol does not require expensive equipment, and its power consumption is minimal compared to the PoW system. The work of transaction validation and block creation is performed by randomly selected persons. |
| Its main objective is to provide security and protect the system from possible attacks (DDoS) that may occur. | PoS aims to provide participation and reward those chosen to perform validations to achieve objectives. It also provides protection and security. |
| In this PoW protocol, the blockchain that has more support or longer is the blockchain that achieves with more work, this means (hashrate) that it has more computational power to perform the complex mathematical operations. | The PoS algorithm, the chain that has more support is the blockchain with more collateral, we call it (stake). |
| For mining you need computerized equipment, advanced mining machines. | PoS does not need external computer equipment for mining. |
| PoW is decentralized, so with this protocol they mine with total freedom. | PoS works with a centralized system, which makes it difficult and restricts everyone from obtaining the benefits that this protocol offers when mining. |
| PoW when creating a block is 10 minutes long. | PoS when creating a block only takes a few seconds. |
Advantages and Disadvantages of PoW
| Advantages | Disadvantages |
|---|---|
| Cryptos using PoW are the most successful and recognized worldwide, some examples are Bitcoin, Monero, Litecoin, among others. | Mining requires a large investment in hardware (specialized mining equipment) and software, as well as time to obtain a return on that investment. |
| For the investor who has sufficient funds to make the investment in the mining machines, he will be able to participate without any problems and will obtain great benefits. | Unfortunately, there are countries that prohibit the use of mining machines and mining has been made illegal and is punishable by law. |
| It uses the decentralized system, and this provides freedom to use our assets. | The process PoW takes to create a block is 10 minutes and this makes it a bit slow compared to the PoS protocol. |
| On the creation of a block, this protocol offers rewards and gives a place for the creation of another block. | Some countries have been affected by the crisis, and regularizations, and as a consequence mining in those countries is affected. |
Advantages and Disadvantages of PoS
| Advantages | Disadvantages |
|---|---|
| This consensus protocol uses a technology that respects and favors the environment, because it does not require equipment that consumes large amounts of energy. | A major disadvantage is that there is a risk of losing assets due to possible attacks by hackers, and this is because this protocol requires that the wallet is always open and connected, and this would cause hackers to take advantage of it to steal the wallet's assets. |
| PoS needs to be connected to the Internet to work. | PoS operates in a centralized system. |
| Your process to create blocks will only take a few seconds, this makes it a very fast process. | What we manage to obtain from the money invested, as a result of the profitability will be linear. |
| PoS is not affected by regularizations, because everything is on the blockchain, which means it is not affected by heat or electrical problems. | The minting of tokens using this PoS consensus mechanism will only depend on the validators selected to verify and validate transactions and create blocks. |
Which one is better in scaling Capacity?
In terms of duration, the PoS consensus protocol is better for scaling capacity, because the process of creating blocks will take a few seconds, and also it does not need specialized equipment that affect the environment and consume large amounts of energy, for this reason PoS creates more blocks in a short time and this makes it better in scaling capacity. On the other hand, the process of the PoW consensus mechanism is a little slower, because it takes 10 minutes to create a block, and it needs mining machines that consume a lot of energy and produce heat and this affects our environment.
Examples
- Bitcoin
It is the first cryptocurrency, and also the first to implement this PoW consensus mechanism, which as we have read before, this process of forming a block takes 10 minutes and consists of solving complex mathematical algorithms.
- Litecoin
This cryptocurrency is based on Bitcoin, and has a PoW consensus mechanism system similar to that of Bitcoin.
- Ethereum
Ethereum uses the PoW consensus mechanism, many use this platform to create tokens, and we can say that many cryptos are using this PoW protocol. But this Ethereum blockchain wants to switch to the PoS consensus mechanism, with the new 2.0 update, and thus achieve no more dependence on mining machines.
- Tron
This crypto works with the PoS consensus protocol, and thus also provides a minimum cost in gas for operations and transactions within this platform, it grants a participation per year of 4%, it also offers many benefits such as creating Apps within the platform with the functions of smart contract.
Conclusion
Performing this task, you can observe and learn that each consensus mechanism has its advantages and disadvantages, which means that none of these mechanisms is 100% perfect, but I want to emphasize that if there are some that work better than others and with respect to the environment, if there are protocols that do not affect the environment, and such is the case of the PoS protocol that only requires to be always connected to the internet and does not need mining machines that are very expensive that affect the environment and consume a lot of energy. But this PoS protocol also has its disadvantages, and one of them is that it is prone to attacks by hackers, being vulnerable to remain always connected to the internet, and run the risk of theft by having the wallet always open.
PoW is highly secure and decentralized, but it uses very expensive equipment that consumes large amounts of energy.
It is important to note, in my personal opinion to choose to invest in a crypto that perhaps uses the PoW protocol or uses the PoS protocol, taking into account that everything will depend first of all on the extent of our capital to invest and what we want to achieve with the investment, will be our choice.
THANK YOU SO MUCH!