Hello Crypto
world,
Today, I’m going to tell you something
important through my blog. The topic which I’m going to discuss has confused
most of the people. So, in our today’s blog we’ll cover the points such as “Proof
of Work” and “Proof of Stake.” This is a very interesting topic, so every
crypto enthusiast must know it. So, let’s start with our topic.
A general knowledge is required to understand
this topic. So, we’ll discuss first about the Miners and Mining process carried
out in Cryptocurrency generation.
Who
is a Miner?
A miner is a person who uses his
computational power to solve a computational problem which allows them to form
a new block of transactions after successfully validating it.
A miner gets reward in form of “Block
reward” and “Transaction Fee” only if he solves the problem before other miners
and validates the transaction successfully. It’s not a challenging task because
miners use High GPU Graphics and Hardware to make this thing easier. They do it
on a large scale by opening a “Mining Farm.”
This is just a brief explanation of miners. I’ll drop a link below for further study.
This is just a brief explanation of miners. I’ll drop a link below for further study.
Now, we’ll begin with our topic.
What is PROOF OF
WORK?
Proof of Work also known as POW was
first successfully implemented and operated by Satoshi Nakamoto who introduced
Bitcoin to the world. As prior we discussed the Miners and their work which got
you to know about their process. In Proof of work, the same definition implies.
“Solving the Mathematical Problems by
using high computational power to validate the transaction in a block is called
Proof of Work.”
Mining new coins takes a lot of
computing power resulting in high electricity usage. This happens because of the
Proof of Work Algorithm. Even it takes a lot of money investment to start with
Proof of Work mining. The systems, hardware, air coolers, coolants, space,
maintenance, etc are required to start with POW. Satoshi Nakamoto used Proof of
Work to secure the Bitcoin Blockchain and reach consensus between many nodes on
a network. A consensus is a general Digital Agreement. Proof of Work is implemented on
Bitcoin, Monero, Litecoin, Ethereum 1.0, Zcash, Vertcoin, etc.
 |
| Source: BitcoinEnergyConsumption.com |
Once POW is understood properly, we
can dive deeper into Proof of Stake.
What
is PROOF OF STAKE?
In Proof of Stake, there is no need of
any heavy hardware or computational power required. It can be easily done via
any type of Desktop computer and Laptop.
“A Proof of Stake is a concept in
which a person can easily mine or validate blocks by investing a certain amount
in the wallet as a safety deposit.”
This doesn’t mean that everybody can
become a Validator of Proof of stake System. There are certain criteria which
need to be adhered to by the person before starting with Proof of Stake
concept. POS works on a lottery type system. To become a validator the node has
to deposit a certain amount of coins into the network as ‘STAKE.’ If the amount
deposited by you in your wallet is higher than other validators, then the
chances of you are increased to perform a transaction. Even the selection depends
on Coin age in your wallet. In short, if you hold coins for a longer time then
your chance to get selected increases as well as the trust level too.
Proof of Stake effectively simulates
the burning, so no real-world energy or resources are actually wasted. Anyone can
do it through their personal Computer at home or anywhere. POS doesn’t have
Miners but instead has validators and it doesn’t allow people to mine new
blocks but instead ‘MINT’ or ‘FORGE’ new blocks.
Compared with Proof of Work, Proof of
Stake requires less electricity because it doesn’t need any heavy computing
system to run. It is also inexpensive and easy to do. The coins which run on
Proof of Stake concepts are ReddCoin, Stratis, NAV coin, NEO, Ethereum 2.0, etc.
Here, the difference between POW and
POS can be easily noted.
But
WAIT!
There’s still something important
missing here.
Have you heard
about the term 51% Attack?
If not, then don’t worry I’ll tell you
about it.
What is 51% ATTACK?
In case of Proof of
Work;
When a group of miners holds 51% or
more than 51% of mining power then they can achieve some powers which can make
this Decentralized system turn Centralized. The miners can –
·
Never confirm
your transaction.
·
Block your
transaction mid-way.
·
Even after
confirmation they can reverse the transaction.
·
They can Double
Spend the amount.
Current mining pool can be checked
below.
 |
| Source: Blockchain.com |
Just imagine if any of these miners
get combined and form a community of 51% then they can have the power to misuse
the Blockchain system.
So, to avoid this type of attacks
Proof of Stake is formed. Let’s check what happens in Proof of Stake concept.
In case of Proof
of Stake;
Since, mining can’t be done here so
the validator must have to stake 51% the total currency control. This means out
of 100% BTC available in the world, the validator must have 51% of it of his
own. Here, the power of unity won’t work like the mining pools have, which we
discussed earlier. The amazing part is, when you deposit a certain amount as
your Stake and start with the Proof of Stake concept, then you won’t get a
transaction amount to be solved more than your stake. If you think of tampering
or doing fraud in the block then all your Stake deposit will be lost. This makes
POS’s 51% attack more expensive. It’s like calling trouble itself to ruin your
nest.
So, here our blog comes to an end.✌
I hope the doubt between Proof of Work
and Proof of Stake is cleared now.
Still have a
doubt or query?😦
Connect to us via email or comment. We’ll
definitely reply to your feedback.
Thank You.💓
ADDITIONAL LINKS
51% attack
Bitcoin mining
cryptocurrency
digital currency
Holders
miner
mining
proof of stake
Proof of work
Stake
3 comments
Beautiful description 💐💐💐👌
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