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Author Topic: Infographic: Proof Of Work VS Proof of Stake (An Overview for Beginners)  (Read 85 times)
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March 13, 2018, 07:50:11 PM
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I created this simple infographic good for beginners to give a quick overview of Proof of Work VS Proof of Stake. I didn't go deep to explain as it doesn't fit an infographic because there is a lot to say about it, too much for an image.
I am still in training mode with infographic so excuse me for the swag missing in Grin Feel free to give your opinion about it good or bad, bad is also good to consider (: )

Not enough for you? Here is a more deep explanation

What is Mining?

Without going into too many details, we need consensus because anyone can create a block; while we only want an unique chain, so we want a way to decide which block we should trust.

Mining is a process of validating a transaction or block in a network by the process of complex algorithms to prove and validate the correctness of the transaction and thereby add the new block to the chain. You would have heard this term “mining” and “miners” more in bitcoin than altcoins. What does it take to be a miner and do mining?

You need to have high power processor based computers running continuously with the complex mining algorithms.

When a transaction happens in the respective coin’s network(let us say in bitcoin network here for easy understanding), more the computing power and more the computers you have, you may get to validate the transaction faster than other miners in the network and hence may earn a fraction of a bitcoin as a reward.

Anybody who can have the above mentioned hardware and setup, can be miner

There are some alt coins which follow a different consensus process and/or algorithms that is not through the process of “mining” and hence they will be referred as “Not Mineable” coins

Proof of Work(PoW):

Proof of Work (PoW) as the name states is the validation of the work that happened and proving it is correct. Bitcoin and many alt coins follow this way of consensus to make sure the authenticity of the chain is good.

To understand how it works in simple terms, assume that you are in a math exam along with other students in a classroom. The student who can, not only come up with the correct answer but also can come up with the complete proof (steps in math terms) of arriving at the correct answer first gets the reward. As we know this needs the student with lot of brain power which naturally consumes a lot of energy from the body.

Now mapping it to the cryptocurrency world, “math exam” refers to the “transaction”, the “classroom” refers to the “world”, “Student” refers to the “computing hardware/computer” that runs the complex algorithms, “brain power” refers to the “computing power” and the “lot of energy” refers to the “lot of electric power”. I hope it is easier now to understand.

As every concept or approach may have its own benefits and downside, PoW has its own downside as below

· Requires more electric power which in turn costs the miner
· High computing power hardware which is expensive(not if you are a millionaire Smiley )
· Possibility of miners moving their hardware to mine a different coin if the reward is better there(loyalty)
· With more and more coins(like more count of bitcoins) getting released, miner’s reward would come down as the coin becomes scarce to mine

Proof of Stake(PoS):

Proof of Stake (PoS) is an alternate way of verifying and validating the transaction or block. This will pick the Validator (Equivalent of “miner” in the PoW) by the amount of stake(coins) a validator has and the respective age of the stake. If you have 100,000 alt coins (let us say Nxt coin which use PoS) in a wallet, it will have an age attached to it on how long you have it. Here the 100,000 Nxt coins is the stake. If you move your coins from one address (or wallet) to another the aging gets reset. This amount is like the security deposit which means the Validator holds a significant stake in Nxt coin with good aging is more committed and combined with many other factors, will get a higher chance to validate a block. This allows building a trusted and distributed network with loyal Validators (high stake of coins). The Validators earns the part or whole of the transaction fee. In PoS, it is not “mining” but “forging” which is done by the Validator who will process and forge a block to the chain.

This eliminates the below challenges from PoW and believed to have an advantage

· No need of expensive hardware(a normal laptop or computer running the respective coin’s Validator client will do as long as your laptop or computer is online)
· Energy efficient as it won’t consume high electricity as PoW does
· More loyal Validators …As higher the stake the Validators have for a long time, more chances for the Validator to be picked up for “forging” and earn the transaction fee
· Faster validations

In PoS, each validator owns some stake in the network, Ether in the case of Ethereum, that they bond. Bonding stake means you deposit some money into the network, and in some sense use it as a collateral to vouch for a block. In PoW you know a chain is valid because lots of work is behind it, while in PoS you trust the chain with the highest collateral.

There are much more differences between the various Proof of Stake algorithms that are being developed but I am limiting to what I said so far just to provide a higher level of differnces.

There are currently issues with PoS as well, such as a small group of people owning a majority of tokens/coins will be the Validators but it is still evolving and eventually more solid and robust will be out there at some point in time.

Ethereum is also moving towards PoS with its new “Casper” protocol and you can read more about it in the below link

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March 14, 2018, 01:15:16 AM

Thanks for posting informative article like this. Now I have some idea about POS and POW and their differences though I do not really fully understand it.

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March 14, 2018, 03:40:36 AM

This is good one for the newbies. You can add more Pros and Cons of PoW and PoS to make it more effective.
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March 14, 2018, 12:23:05 PM

This article is also a good explanation
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May 22, 2018, 12:52:25 PM

What is Proof of Work(PoW)?

Proof of Work(PoW) is a mechanism(called Mining) used by miners to verify the happening transactions on the blockchain network and earn rewards in the form of cryptocurrencies.  
Mining is a procedure of approving a transaction or block in a system by the procedure of complex algorithms to demonstrate and approve the accuracy of the transaction and subsequently add the new block to the chain. It also avoids the risk of double-spending (i.e. only one of the two simultaneous transactions will achieve consensus).  
In simpler terms, when a transaction is carried out, it is stored in the block. This transaction in the block needs to be verified by the miners to check whether the transaction is a legitimate one. For this, PoW algorithm is run by the miners and the very first miner to solve the complex problem receives the block reward and the verified transactions are stored on the public blockchain.
What is Proof of Stake?

Proof of Stake is also a mechanism with the similar purpose as that of Proof of Work but it validates the transactions by deterministically picking the maker of the new block based upon his assets which are termed as ‘stake’.
 In the PoS system, there is no block reward instead of the chosen maker(commonly called as Miners) of the block, charge the transaction fees. Hence, such miners are also known as forgers.  
The first cryptocurrency to use PoS based system was PeerCoin in 2012 with many other coins like Nxt, Blackcoin, Nav coin, etc.
The founders of Ethereum have finally come up with Ethereum’s Casper – a PoS based finality system. It is said to be taking the form of a hybrid PoW/PoS system.
Coins based on these systems:

PoW Coins

- Bitcoin
- Litecoin
- Ethereum
- Monero
PoS Coins

- Cardano
- OmiseGo
- Ardor
PoW/PoS Coins

- Dash
- Stratis
- HShare
- Pivx
Differences between PoW and PoS:

1. Safety

Any system today aims to become safer, which is free from the hacker attacks, where the main concern lies on the money or data. The community is still skeptical about who among the PoW/PoS is safer.
In the Proof-of-work based system, the unwanted mediators are cut off as it’s very expensive and it may happen that it takes more money to make the attack than they are willing to steal. Whereas, in the Proof-of-Stake based system, the hackers have to buy more than 51% of the total crypto coins, which isn’t expected to hit anytime soon.
2. Energy consumption and Cost
In the PoS based system, no heavy and expensive hardware and computation power are needed. All you need is a normal laptop or PC with active internet connection. Hence, high electricity is not consumed as consumed by the PoS system.
3. Speed and Effectiveness of transactions
In the PoS based system, the transactions are faster compared to PoW based system. As the validator also has a considerate stake of his assets in verifying the transactions, the risk of fraud almost stands close to null resulting in more loyal transactions.
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May 23, 2018, 01:51:04 PM

Questions from a beginner:

1.  Does Proof of Work mean that when you approve something you are mining a new block in a blockchain, where the information is stored and the transaction is being done through the mined block?
2. Does PoW require an ownership of hardware?
3. Does Proof of Trust do the same but through online services and based not on the work done but the reputation that the other party has?
4. Do participants of PoT also make mining?

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