Unveiling how PoW is different from PoS
Bitcoin uses proof-of-work (PoW) to sequence its transaction history securely, but it is energy-intensive and has a finite transaction capacity. New consensus mechanisms that emphasize the less time- and energy-consuming approach have arisen, with the proof-of-stake (PoS) model being one of the most well-known.
Computer networks may cooperate safely thanks to these consensus techniques. The two primary consensus techniques currently employed by decentralized finance (DeFi) initiatives to cryptographically reach consensus on cryptocurrency networks are proof-of-work and proof-of-stake. They had to devise a way to authenticate transactions without the assistance of a third party while Satoshi Nakamoto was developing Bitcoin, the first cryptocurrency. They did this using the proof-of-work consensus method, which enables networks to agree on genuine transactions.
Proof-of-stake (PoS), on the other hand, is a cutting-edge consensus technique that drives more recent DeFi initiatives and cryptocurrencies. Some projects start with PoS immediately or switch from PoW to PoS. But immediately constructing a PoS consensus network is a huge technological challenge; it is not as straightforward as utilizing PoW to achieve network consensus.
The proof-of-work concept was initially implemented in 1993 to combat network spam emails and denial-of-service attacks. To validate new blocks in the Bitcoin network, Satoshi Nakamoto introduced the PoW idea in 2008. PoW is predicated on the ability of network users to demonstrate that a computing task has been completed. A node, or piece of computer power, is used to solve a mathematical problem; once the equation is resolved, a new block on the chain is validated. Any physical instrument, such as a computer that can receive, send, or forward data within a network of other tools is called a node.
Users may detect tampering by utilizing hashes, which are lengthy strings of integers that serve as proof-of-work in practice. The hash function is a one-way function; therefore, it can only be used to compare the original data to the data that created the hash. Nodes then check transactions, guard against double-spending, and select whether or not to accept proposed blocks as new links in the chain.
Double-spending is the practice of making payments in the same currency twice to fool the recipient of the cash. Immutability, decentralization, and trustlessness are the network’s most significant qualities, and double-spending would completely abolish them. Because modifying any section of the blockchain would require re-mining all subsequent blocks, proof-of-work makes double-spending extremely challenging. Users cannot dominate the network’s processing power since the equipment and electricity required to perform the hash functions are costly. A PoW protocol also utilizes cryptography and computing power to create consensus and ensure the legality of transactions recorded in the blockchain.
The first block in a PoS blockchain is known as the genesis block and is also hardcoded into the software. Every block added to the blockchain after that contains a complete and updated copy of the ledger and always refers back to the previous blocks. The power to add blocks is not contested by miners in the PoS network. The blocks are commonly referred to as “minted” or “forged” rather than “mined.” Unlike PoW blockchains, PoS blockchains do not restrict who can propose blocks based on energy use. Despite the significant energy demands of PoW blockchains, cutting-edge consensus techniques like proof-of-stake do away with mining.
Since mining blocks don’t need much energy, the proof-of-stake method is superior to the proof-of-work model in several ways. In addition, making new blocks doesn’t require cutting-edge technology. With proof-of-stake, the network has more nodes. A network with more nodes can establish governance principles that offer a better defense against centralization. This is made feasible in PoS systems by a higher level of hardware independence. Proof-of-stake is, therefore, widely seen as the consensus technique that will prevent network centralization.
