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Different Consensus Mechanisms: PoW Vs. PoS
Cryptocurrency 101: Understanding two main mechanisms of consensus
The world of cryptocurrencies is a complex and rapidly developing space, with new technologies and consensus mechanisms regularly appear. In the core, a cryptocurrency is based on a decentralized network that allows users to control their own transactions and assets without the need for intermediaries such as banks or governments.
In this article, we dive into two of the most used consensual mechanisms in cryptomena: work evidence (Pow) and evidence of deposit (POS). These mechanisms are decisive for the functioning of various cryptocurrencies and have significant consequences for their safety, scalability and acceptance.
Evidence of work (Pow)
Pow is the most commonly used consensual mechanism in cryptomena. He first introduced himself with Bitcoin’s hard fork from 2008 and has been adopted by many other cryptocurrencies, including Ethereum, Monero and Litecoin.
In Pow, the miners’ network competes with the solution of complex mathematical puzzles to verify the transactions on the blockchain. These puzzles are designed to be difficult to solve with the current computer performance and is therefore the concept of “work proof”. The first miner to solve the puzzle gets a new block of transactions to the blockchain and is rewarded with a newly raided cryptocurrency.
This is how it works:
- Miners collect and verify transactions on blockchain.
- Miner selects a group of transactions to be included in the new block (“block reward”).
- Miner calculates mathematical puzzles for each transaction in the selected group.
- The first miner to solve the puzzle, known as “work of work”, is rewarded with a newly raided cryptocurrency and rightly add another block of transactions to the blockchain.
BENEFITIONS POW:
- Energy efficiency : Pow requires a significant computational force that reduces energy consumption.
- Security : The use of complex mathematical puzzles makes it difficult to manipulate harmful actors.
- Scalability : Pow can handle the high volume of transactions per second.
Disadvantages of Pow:
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- Centralized control : Mining funds, which are often dominated by large companies or countries, can lead to centralization in the network.
Evidence of Deposit (POS)
POS has gained popularity as a more energy efficient alternative to Pow. He first introduced himself with Hard Fork Ethereum in 2016 and has been adopted by many other cryptocurrencies since then.
In POS, validators are selected to create new blocks based on their balance of cryptocurrency in their wallets. Validators who have a higher amount of cryptocurrencies (ie J. Those who own more) have a better chance of choosing to participate in the validation process.
This is how it works:
- Users insert their cryptocurrency into your wallet or exchange.
- Create a random selection fund that selects users based on their balance.
- The highest user from the area is selected as a validator.
BENEFITS POS:
- Energy efficiency : POS requires significantly less energy than Pow, making it more environmentally friendly.
- Increased security : Validators have more control over their assets and are less likely to be manipulated by harmful actors.
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Disadvantages POS:
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- Slower blocks : POS may be slower than Pow, as the validation process takes longer due to the need for multiple validators.
