PoW vs. PoS

Proof of Work

PoW is a consensus mechanism used on the Bitcoin blockchain and, to date, is probably the most popular system as it is the most secure. In PoW, miners must confirm blocks by expending computing power, either through a CPU, a GPU, or an ASIC (Application Specific Integrated Circuit). WebDollar uses Argon2 algo, that means GPU unfriendly and ASIC resistant, therefore the most efficient mining device is the CPU. Such computing power is used to solve a complex algorithm, known as hashing, in order to find the correct answer. In doing so, all transactions that have taken place are confirmed and grouped in that particular block for which computing power is being expended. Simply put, miners race towards solving a difficult mathematical formula in order to unlock the block reward. More CPU power = more hashes per second, more hashes = more chances to confirm a block.

  • Security :  More difficult to attack than a PoS mechanism.
  • Time Tested:  Bitcoin, Litecoin, and most of the large “old-school” blockchains are built on PoW; Bitcoin is the oldest blockchain and therefore is trusted by most of the community.
  • Fair: PoW leads to very fair mining, and any computer can mine with minimal barriers.
  • Environmentally unfriendly:  PoW mining involves very wasteful computations, which consume large amounts of electricity and are bad for the environment.
  • Not scalable : No serious PoW blockchain has been able to reach significant throughput and finality. Ethereum’s 20 transactions per second do not allow for building serious DApps on the machine.
  • Transaction fees:  It is very costly to send or call anything on a PoW blockchain, again reducing the ability to scale.
  • Split governance :  Miners verify the network, even though the shareholders are assuming most of the risk of that network. This is a fundamental problem with PoW that affects its updates and forks.

Proof of Stake

Proof of Stake has the same purpose as the PoW mechanism, though it reaches its goal by tackling it in a different way. It is a consensus mechanism in which miners are stakeholders, rewarded for mining simple blocks with no extra computations. In PoW, miners are rewarded for solving the mathematical problems when a new block is created and validating transactions. In contrast, with Proof of Stake, the creator of a new block is chosen in a “deterministic way”. It all comes down to the miners wealth, defined as a stake, which is indexed and chosen at random, in some cases using a method called follow-the-satoshi. The person who mines or validates transactions is limited to how many coins he or she holds. Mining Probability is determined by randomisation, stake, age, and vote. The more of the said cryptocurrency, the more mining power he/she has. There is no requirement for block rewards. Instead, value is derived from transaction fees.

  • Fast:  Some blockchains using this tech are able to reach hundreds of thousands of transactions per second.
  • Feeless: Transactions can be submitted to the blockchain for free (Steemit, EOS). This allows for scaling.
  • Efficient : PoS doesn’t waste electricity in the same manner, since there are no useless computations going on.
  • Unified governance : The stakeholders are the miners and decision-makers. This is advantageous in comparison to the miner-stakeholder dichotomy of PoW.
  • Less Secure :  PoS seems to be prone to more attacks, usually have less decentralisation, and is much younger of a model. It hasn’t endured the same battle-testing as a blockchain such as Bitcoin.
  • Nothing at stake :  Because no work is done, miners have nothing worth losing that incentives them to act accordingly. It is unclear how some PoS models can defend against DDoS attacks and spamming networks.
  • Rich get richer : Because coins need to be staked in order to participate in mining and mining rewards based on stake, PoS is a system that necessarily benefits large stakeholders. This goes against the fundamental beliefs behind distributed ledgers.



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