Proof of Stake and Proof of Work: Let’s Talk About Competing Protocols A few years later, new blockchains emerge, and some of them began to use the proof-of-stake (PoS) consensus algorithm, which is gaining popularity.
In this article, we will go into detail about the characteristics of each protocol and explore the differences between them.
PoW in a nutshell
Nakamoto applie PoW to the Bitcoin electronic currency system, which he is also creite with inventing. In his research paper, publishe on October 31, 2008, he describe PoW as a technology that would solve the problem of double-spending of “coins.”
In simple terms, PoW provides evidence base on the work done by computational power. This evidence is then accepte by network nodes as being create base on the calculation of a hash function.
What is PoW
As we define above, PoW uses computing power to solve a cryptographic problem calle a hash function. A miner becomes a node in the network, creating a new block in the blockchain base on the work they do. Miners try to find a specific hash base on inputs that are preetermine by several factors, including the hash rate, which reflects the performance of the entire network.
Its goal is to maintain an average block mining time of 10 minutes. So, every 10 minutes, a new block is create and adde to the existing chain. This process is calle mining because it is similar to real-life mining. The miner who creates a new block is rewarde with new Bitcoin. The reward serves as an incentive to do the work.
Bitcoin’s PoW works on the basic
Rule that the longest chain wins. A newly mine block is not yet final and nees to wait for confirmation, six confirmations to be exact, since while mining, another miner can add another block, and then another one.
This is why some exchanges wait for six or more block confirmations – they simply don’t want to take the risk of your transaction not being confirme.
PoW: Pros and Cons
Separately, we will note certain advantages of the PoW method. The main one here seems to me to be the security system of the blockchain itself, which will be difficult to deceive. Once the blocks are finalize, they cannot be rewritten, so the system is effective and trustworthy. Any attempt to rewrite the newest part of the blockchain will be too expensive for potential attackers, greatly reucing the likelihood of rewriting older parts.
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The number of miners is growing
As is the hashing power, and with it the security of the network. Statistics show that hacking attempts are too expensive for 51% of attackers.
However, there are some the slow death of third-party cookies areas where PoW is inferior to PoS. PoW is relatively expensive and wasteful of resources. Expensive and short-live hardware is just one of the costs miners face. Add to that the extra heat from the hardware, and the prohibitive electricity bills, much of which is simply waste.
PoW blockchains are also very slow. On average, it takes BTC miners as long as 10 minutes to find a new block. Moreover, when there mailing lead is network congestion, transaction fees skyrocket due to their low throughput.
The time when you could
Mine bitcoins just sitting at your personal laptop has passe. Due to the increase complexity of mining, bitcoin can only be mine on specialize and very expensive equipment – ASIC (application-specific integrate circuit). Because of this limitation, there are not many groups of miners, but this means that they own most of the mining power, which in turn reuces the degree of decentralization and increases the likelihood of an attack.
PoW-base “coins”
Other PoW networks, such as Litecoin , Dash , and Dogecoin , are forks of Bitcoin with some additional upgrades (shorter block finality times to allow faster transactions or privacy).
But even with all the improvements, they are not as efficient as most PoS protocols.
Another PoW network is Ethereum
Which implements the EVM (Ethereum Virtual Machine) to enable smart contracts. A major upgrade, but the developers are well aware of the scalability problem. It is expecte to be solve in the evolve version of Ethereum 2.0.
Kulupu and Kadena, both base on the Substrate platform, are also new types of PoW blockchains. They will be connecte to the Polkadot ecosystem in the future, which should solve the scalability problem that plagues Bitcoin and Ethereum. But Kulupu and Kadena are still in testnet, so we’ll have to wait until they finish their mainnets and connect to Polkadot via a parachain slot. Then I’ll be able to talk more about them and their solution to the scaling issue.
PoS in a nutshell
PoS is a new type of consensus that aims to solve the scalability and energy consumption issues that most PoW blockchains are notorious for.
To better understand what PoS is, imagine that you are outsourcing the work to the staking process, which is determine by the stakers.
