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Proof of Work vs. Proof of Stake

Proof of Work vs. Proof of Stake


For a seamless operation of digital currencies, computer algorithms is requires. The two different kinds of computer algorithm which provides the means to achieve this are Proof of Work (PoW) and Proof of Stake (PoS). Bitcoin and Ethereum, the most popular cryptocurrencies use these algorithms. A distributed consensus is attained via the use of these algorithms. 

Proof of Work (POW)

The use for the proof of work algorithm is mainly evident when there is a need to add a block to the blockchain. This algorithm creates a decentralization of the communication between different nodes of the blockchain. There are specific Proof of Work algorithm used by different cryptocurrencies, for instance, the Hashcash (SHA-256) is the algorithm used by Bitcoin. For new blocks or nodes to be added to the blockchain by miners, the Hashcash algorithm is used to solve difficult mathematical problem. A function of the Proof of Work algorithm is that is provides the verification data needed for the validating the total amount of work done on the blockchain. It is required that block header’s are hashed for the mining of blocks by miners to be successful. This is achieved by ensuring that the hash of the block header is less than or equal to that of the target. The SHA-256 hash of all block header’s is compulsorily an alphanumeric value, and it must always start with 18 zeros. The target is altered for every difficult change and it is after every 2016 block that this change takes place. There is always a reward for miners for each block that is mined. 

Proof of Stake (PoS)

The Proof of Work algorithm consumes so much electrical power and time when mining, and this was not beneficial to most miners. Hence, this brought about the Proof of Stake algorithm. Dissimilar for the Proof of Work, in Proof of Stake, blocks are not mined. They are rather forged or minted. This is simply done by selecting peers through the pseudo-random mode whose stakes are high in the system. There is usually an analysis of certain factors such as coin age and arbitrary block selection before the selection is made. The fees obtained through the transaction of minting or forging is what is given to those selected, unlike the reward system of Proof of Work. 

Both the Proof of Work and Proof of Stake are important and distinct in their algorithms. However, there seems to be more issues related to the Proof of Work algorithm which makes it Proof of Stake a better alternative. Some of these issues are; 

  • The need for high computing power to achieve an effective mining. They are also expensive. 

  • Proof of Work is not cost effective as it consumes lots of electric power. 

  • The mining strength is greatly diminished as miners can easily use their hardware to mine other crypto coins for more rewards. 

  • The indirect proportion of crypto coins released and rewards for miners. 

These issues above posed by the Proof of Work is however handled by Proof of Stake 

  • A normal computer or laptop is used rather than the high cost hardware.

  • Energy efficiency

  • There are more verifiers and the authentications are quicker.

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