Proof-of-Work (PoW) Proof-of-Stake (PoS) consensus algorithm

What is the Proof-of-Work consensus model (PoW)

This is the dominant algorithm among the largest cryptocurrencies. It is used by Bitcoin, Ethereum, Litecoin, Dogecoin, Bitcoin Cash and ^[1].

How it works:

The miner's equipment solves the cryptographic problem that the blockchain poses to him. In particular, so new blocks appear in the chain: iron must "solve" the problem in order to be able to create the next block.

Unraveling is the simplest search for millions of code combinations, but requires huge computing power and creates proof of 'work'. The proof of 'work' is a unique value (hash).

Once the miner finds him, he sends the hash to other computers on the network for verification. Other participants may verify the hash against the task, but may not use it to create a block. Hash unraveling key belongs to the miner that created it

The peculiarity of the hash in its asymmetry is complex enough to find the miner, but simple to check the other network participants for compliance. At the same time, each hash carries the information of previous units of the network. Thus, it is confirmed that all actions were carried out within the framework of one blockchain.

Let's visualize:

Let's say you know the number of the winning ticket in the lottery: 351. It would be nice to go to the box office and ask for a ticket with these numbers. But you can't because tickets are issued randomly. All you can do is pay for the ticket and hope to get a happy number: 351. If not, unlucky. Buy another ticket and try again.

The good news is that you can try as many times as you want. The bad news is that you have to pay for every new ticket.

In the lottery, each player hopes that he will receive a winning number before others. Similarly, each miner hopes that he can create a 'winning' hash before other miners.

If the miner found the correct "answer" first - he receives a reward in the form of a cryptocurrencies blockchain.

What are PoW cons:

• The first drawback is environmental damage. Mining absorbs a monstrous amount of electricity. Computers wear out quickly, new ones come to replace them, and old ones are thrown away - this is how whole dumps of parts arise.

• The second drawback is protection. Proof of Work provides a sufficient level of security only when there is a large group of miners competing for a unit fee. If the network is small, the possibility remains that the hacker can get a simple majority of computing power and reorganize the blocks at his discretion. It's also called a 51% attack.

Alternative Consensus Algorithm PoS (Proof-of-Stake)

It is devoid of these two downsides, and looks like a fairer model.

The operability of the PoS blockchain is supported by validators - owners. cryptocurrencies They check user transactions, and if at least 2/3 of the validators agree that the transaction is correct - it is included in the new blockchain block.

Validators are engaged only in useful work (verification), and not in the search for numbers, so they do not have a race for performance, like miners.

However, for the network to work well and quickly, validators must run software on a very powerful iron, with a constant connection to the 24/7 network and a wide Internet channel. The laptop won't work.

How everything works:

The validator gives the net a deposit of his coins to participate in the validation process. He doesn't need to mine the blocks. He only needs to create blocks and check the blocks of other validators.

From each transaction, the validator receives a reward. If it is discovered that he deceived the network, he will be punished and part of the pledge will be taken away.

Large currency holders have an advantage:

With a large number of validator transactions with a large pledge, the network "assigns" more blocks to check. And the reward is distributed in proportion to the number of littered blocks.

But the mechanism is designed so that users with a smaller wallet also participate in the validation and distribution of the award.

The main advantage of PoS is speed.

Many PoW blockchains (for example, Bitcoin) will never be able to process transactions as quickly as PoS blockchains. And speed is a key factor for a network that wants to become the Internet of the future.

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