What are PoS and PoW mining? Introduction to the Masternodes.

[wwzsocki]

Do you still think that mining cryptocurrency occurs only with hardware? Thinking of buying video cards or even incomprehensible Asics? Then this is the post for you!😀

Proof-of-Work vs Proof-of-Stake

This post is a preparation for you to discover a new, promising and unique way to mine cryptocurrency at home, without investing in questionable investment funds, cloud mining, and even without investing in equipment. Do you want to earn cryptocurrency on your usual weak laptop? Then get ready, you need to read very carefully, and maybe several times.

Let's start with the fact that cryptocurrency mining methods can be divided into 2 types: Proof-of-Work (PoW) and Proof-of-Stake (PoS). PoW and PoS are cryptographic protocols that determine how this network will function and how exactly new coins will appear in the world. Both of these protocols perform a protective function, ensuring the security of transactions.

What is Proof of Work (PoW) mining?

Pow mining
You can translate this protocol from English as “Proof of Work”. Working with this protocol requires a large amount of computing power, which ensures the security of the network. The main objective of this protocol is to prevent DDoS attacks from bad people who want to harm the work of the financial system. The processing of this protocol requires the so-called “computer time”, and the network security is ensured by the sum of the computing power of all network participants. It is to work with this protocol that people constantly buy new and new equipment, seeking to increase their capacity in the network and receive remuneration for it. Thus, to attack a network, hackers need to have 51% of the power of the entire network, which is difficult, but in principle real.

Given that Bitcoin works with this protocol, and the main computational power is concentrated in the hands of several large mining pools, it is theoretically possible that criminal collusion exists between them to discredit Bitcoin when it is beneficial for them. We have already witnessed a similar attempt recently, when a group of people (I will not mention their names), controlling a large number of capacities and having a large supply of Bitcoin in their hands, attacked with the aim of putting Bitcoin Cash on the throne. At that time, capacities were switched from Bitcoin to Bitcoin Cash, tens of thousands of transfers in the Bitcoin network were sent at the same time with minimal amounts to overload an already weakened network, and these speculators massively sold Bitcoin and bought Bitcoin Cash, which together caused panic in the market and huge fluctuations in the rates of both currencies. But even then, Bitcoin held out because many people around the world began to buy Bitcoin, taking advantage of its low rate. But let's not get distracted and summarize:

PoW protocol provides network security at the expense of computing power. The reward is given to those who control more equipment (hash power).

What is Proof of Stake (PoS) mining?

PoS-mining
Poker players have probably already guessed that this protocol can be translated as “Proof by the bank (capital, amount)”. This protocol was created in order to “plug holes” in the PoW protocol, the main of which is the very attack of 51% when big miners can dictate their conditions to the rest.

Here your influence on the net is not determined by the amount of power, but by the number of coins you own. The technology is very simple: we install a cryptocurrency wallet on a computer (let's take DASH, for example, as the most famous representative currently working with PoS), throw coins on it (just buy as usual) and .... everything! When you install the wallet on your computer, it synchronizes with the network, you get data on all the transactions that were completed earlier and become, in fact, another decentralized database. The main condition is that the wallet should not be encrypted and must go through synchronization, which can take from a couple of hours to several days. After that, your wallet becomes a so-called masternode, and you get a reward from the network to your wallet.

It all depends on the specifics of the coin. But often coins use the percentage ratio of the number of your coins to the total number of coins in the network. Suppose you have 1,000 coins. Total created 10,000 coins. Your stock is 10% of the world’s currency, and you will receive 10% of all generated blocks once in a given period of time. Again, this usually happens once a day. Thus, you will receive every day a % of the cryptocurrency put into circulation simply for having them in your wallet. No video cards, sleepless nights and burnt motherboards. Beauty, as for me. But the wallet, of course, must be up and running. My wallets are on a separate laptop, which is 95% of the time with the screen off and does not give me any worries.

Why do I personally consider PoS protocol promising?

First - it does not require people to make regular purchases of new equipment, depending on the producers, who make money on this and outbid buyers.

Secondly - an attack on such a network makes less sense than on Proof of Work. The rule of 51% also works here, but now you need to have more than half of the coin reserves and not capacity (hash power).

Thirdly - in PoW mining, the amount of transfer fees depends on the miners. If you want your transaction to be included in the block earlier, you pay more. Miners set the minimum amount of commission for which they are ready to make a transaction. The commission is taken as a percentage, the larger the amount, the greater the commission. In PoS mining, the size of the transfer is irrelevant, as is the greed of individuals. The transfer fee is fixed and always the same.

But of course, this protocol is criticized. The basic wording is “The rich get richer" even more. Who has more coins, earns more. Did those who have enormous computing power work as loaders in the market? Of course, the richer a person is, the greater is his ability to succeed compared to the less rich. So this criticism is also valid for PoW mining. Lucky for us that not all rich people have invested in cryptocurrency, and we have excellent chances to outrun them at the start.

The fact that behind PoS protocol is the future, I personally have no doubt. Now there are coins working at once on both protocols, some hybrids, where the receipt of coins is distributed equally between those who want to work with PoW and who want to be holders of a bank with PoS. Yes, and the famous Aether has already announced the transition to PoS mining, which led to today's price increase, and this growth will logically continue. Let's also summarize:

The PoS protocol ensures the security of the network due to the control package of coins. The reward of the holder is proportional to his stock on the wallet.

I sincerely hope that this article has given you new amazing knowledge, and most importantly, you understood what I wrote.


If anyone is interested in POS and masternodes, I have just updated my other post about how to set up a masternode.

This is a complete set with screenshots and all steps one by one.

You do not need any special computer knowledge, Linux or Ubuntu or any other special programs.

(GUIDE) Node, full node, masternode. How to set up one and make money from it?

This is my text published here https://medium.com/@wieslaw17/masternodecoin-projekt-co-to-jest-w%C4%99ze%C5%82-node-pe%C5%82ny-w%C4%99ze%C5%82-masternode-i-jak-na-tym-zarobi%C4%87-e23c3cd0bad6
After 4 years of using Medium, they removed my account and that is why this link above shows a 404 error now. I wasn't aware of the ban on Medium and now all my articles are lost because I haven't moved them when there was still the time or at least published somewhere else. Lesson learned and from now I will publish only on blockchain services like Steem or PublshOx.

[crypto mania]

Thank you very much @wwzsocki for another detailed post with a very interesting subject. I like your writing style is better and better with every new post.
Actually, I am out of merits but the first one I get will be awarded to this post because I think that this is a bad thing that such a valuable post has no comments, no merits and is lost on multiple pages of this section.
I found this post only because I follow your writings and if not I don't think I will ever read this. There is almost no chance for a thread from page 4 or 5 to be bumped by somebody else as the author or somebody who is following him.
I ask myself why you never bump your own threads and let them get lost between these tons of garbage here and there?
Is allowed, I assume because I see members which literally post only "bump" word. This is the first forum, I have ever registered and all this is new to me despite, I am already more like a year here.

[wwzsocki]

... why you never bump your own threads and let them get lost between these tons of garbage here and there?...

You are right and I don't bump my threads. I assume if nobody comments then maybe nobody is interested?

Just wait patiently for a post or question and monitor answers to my post. After some time, I just forget about some articles, I wrote.

You are right that posts are very fast lost between thousands of published texts on Bitcointalk but bumping is not the form of advertising I will use and don't know any other tactics to make the thread visible en grab members attention.

If anybody has suggestions on how to in an ethical way bump your own thread, I will be glad to hear?

[Tamilson]

You are right and I don't bump my threads. I assume if nobody comments then maybe nobody is interested?

Or perhaps you can move this to mining section? I see that there are no new threads that being created there. Thus, people that really into mining can read the thread and have more constructive opinions.

If anybody has suggestions on how to in an ethical way bump your own thread, I will be glad to hear?

Posting related articles is great way to bump your thread.
Or some updates as well.

[iam_aayushiJ]

There are Concerns over the PoS Algorithm :

Owing to the number of coins equals mining capacity principle, users have often raised concerns regarding a specific kind of Proof of Stake attacks. It has been feared that this approach to mining capacity determination will lead to a rise in the monopoly in the market as the rich will always be in a better position to mine new blocks.

Although the concern is very much valid, the PoS algorithm is not devoid of the remedies for the same. One of the most effective ways in which this is checked is the aging of the coins.

In order to gain the ability to discover new blocks, the coins must be at stake for a specific period of time, usually a month. Not only can the staked coins not be used otherwise during this period, but they also earn their reward only after the same. Moreover, the staked coins automatically expire after the said period and the user has to go through the process again.

Read more on how Proof of stake will transform the digital currencies.

[r1s2g3]

The basic wording is “The rich get richer" even more. Who has more coins, earns more. Did those who have enormous computing power work as loaders in the market? Of course, the richer a person is, the greater is his ability to succeed compared to the less rich. So this criticism is also valid for PoW mining.

This is not valid for POW because in POW it will work as probability and probability of having full reward is less but not 0 or you can say each miner has equal chances in solving the problem.
To me, POS look like some kind of close system . Those who got the initial coin if spread their coin to specific users or individual only so than anybody esle will not get that coin for staking.

Practically, In my early days I tried to chase POS coin and nobody told me correctly , that exactly haw many coin I can receive for staking Y amount of coins.

[DdmrDdmr]

<…> If anybody has suggestions on how to in an ethical way bump your own thread, I will be glad to hear?

In theory, the following apply:

<…> 13. Bumps, "updates" are limited to once per 24 hours.[2] <...>
<…> 21. Old bumps should be deleted. [2] <...>

In practice, outside commerce related threads (Ann, Bounty, Services, etc.) I barely see people bumping threads, and it would be really odd if everyone applied the bum rules to their own threads verbatim, bumping the every 24 hours.

I rather much favour organic pumps, where other people’s comments do so naturally, although that may lead to good posts getting lost amongst the mass.

Note: Your link to Medium in the OP now states "The author deleted this Medium story", when clicked.

[HODL2090]

Let's start with the fact that cryptocurrency mining methods can be divided into 2 types: Proof-of-Work (PoW) and Proof-of-Stake (PoS).

I always thought each algorithm had it's own mining process, cause there are many more algorithms such as DAG, thought they might also have their own miners.
Well detailed post, I would surely be doing follow up research on this and how to mine without hardware

[wwzsocki]

... Your link to Medium in the OP now states "The author deleted this Medium story", when clicked...

Thank you for suggestions and merits of course.

A few days ago Medium suspended my account. I can see my articles but all my links are showing such a message as quoted above.

I try to contact them but no response as for now and from what I see on the internet from other people with the same situation, I think my account is lost forever.

Lucky I can still download all my old articles but all links from 4 years of writing are affected and had to be changed.

This is just insane how services treat their clients. They are allowed to not disclose the reasons for suspension. Just insane.

[wwzsocki]

...Well detailed post, I would surely be doing follow up research on this and how to mine without hardware

I am happy that you liked my post and more important that you learned something new and even have the drive to dive deeper into this subject which is for me as an author the best reward.

If you want to read more of my post about this subject then here is a link: https://bitcointalk.org/index.php?topic=5120117

[tbct_mt2]

It will be much appreciated by crypto investors, who are not familiar with choosing masternode hosting services, setup steps for their masternodes.
I think that such a guide on steps to set up masternodes, from VPS to masternode hosting platforms, will be warmly welcome and expected from so many users in the community.
It is not a free advertise for VPS providers or masternode hosting services, because such a guide has same purposes as guide on how to use bitcoin wallets (from Ledger, Brain, Electrum, etc.)
So, if you have time, and have good skills with masternode setup, I think you should create such a guide, and include that topic link to the OP.

[wwzsocki]

It will be much appreciated by crypto investors, who are not familiar with choosing masternode hosting services, setup steps for their masternodes.
I think that such a guide on steps to set up masternodes, from VPS to masternode hosting platforms, will be warmly welcome and expected from so many users in the community.
It is not a free advertise for VPS providers or masternode hosting services, because such a guide has same purposes as guide on how to use bitcoin wallets (from Ledger, Brain, Electrum, etc.)
So, if you have time, and have good skills with masternode setup, I think you should create such a guide, and include that topic link to the OP.

I already have such a guide and originally was added to this article but I wrote this almost 2 years ago and never published here only in social media accounts because I thought that the quality is not so good and this topic has to be already discussed on the forum. That was, of course, a mistake and that is why I try to update and publish all my old articles especially because Medium closed my account and I have to spread this links because is a shame for such a knowledge to be gone.

I think Bitcointalk is a perfect place for these writings.

I cut out this masternode guide because it was for Masternodecoin and lately this project has some problems and I don't want to advertise it as for now. But this is no problem because this guide is good for all coins with masternodes (POS) so I just remove the names and publish here when is ready.

Thank you for suggestion @tbc_mt2 and merits..

[wwzsocki]

I always thought each algorithm had it's own mining process, cause there are many more algorithms such as DAG, thought they might also have their own miners...

You are right I have described only 2 main mining processes but of course, there are new once developed all the time.

This article was written some time ago and I just updated and posted here recently.

I will try to keep this thread updated and maybe I will add a guide or tutorial with newest pieces of information about mining.

[tbct_mt2]

I known that you were a big fan of Masternodecoin, LOL.
The Masternodecoin is the one attracted me to join the forum, honestly, but that project has not grown well.
However, as you said, such guide is for general masternode/ PoS coins, not only for masternode coin.
The guide should only focus on steps to buy VPS, choose and setup accounts on masternode hosting platforms, then general steps to setup masternode on those platforms (VPS, and Masternode hosting platform). That's all, masternode investors need.

I cut out this masternode guide because it was for Masternodecoin and lately this project has some problems and I don't want to advertise it as for now. But this is no problem because this guide is good for all coins with masternodes (POS) so I just remove the names and publish here when is ready.

Wow, such merits, I don't see them, something like vanishing merits.  

Thank you for suggestion @tbc_mt2 and merits..

[wwzsocki]

...The Masternodecoin is the one attracted me to join the forum, honestly, but that project has not grown well...

Let's hope this project will reborn after the swap and new blockchain launch. Let's hope for the best and prepare for the worst.

...The guide should only focus on steps to buy VPS, choose and setup accounts on masternode hosting platforms, then general steps to setup masternode on those platforms (VPS, and Masternode hosting platform). That's all, masternode investors need...

Thanks again for this detailed suggestion. I have checked my Masternodecoin guide for masternode and is up to date only I have to add these additional pieces of information like VPS, services and so on. I will when I only find the time, I assume at the weekend.

...Wow, such merits, I don't see them, something like vanishing merits.  ...

Sorry, my fault I was surfing on the forum posting here, answering there and one member merited me in another thread and this last line was directed to him, I just put it in the wrong post.

[pixie85]

This was supposed to be an introduction so I was expecting facts only but there's also your objective opinion that PoS is the future and is better than PoW. I don't agree with that. There are both advantages and disadvantages of both systems but PoW is more secure. Also in both systems the rich get richer exactly the same way. PoS could become widely available but for now all coins require you to invest 15-20 thousand dollars at least before you're allowed to participate.

[wwzsocki]

There are Concerns over the PoS Algorithm :
...users have often raised concerns regarding a specific kind of Proof of Stake attacks. It has been feared that this approach to mining capacity determination will lead to a rise in the monopoly in the market as the rich will always be in a better position to mine new blocks.
...the coins must be at stake for a specific period of time, usually a month. Not only can the staked coins not be used otherwise during this period, but they also earn their reward only after the same. Moreover, the staked coins automatically expire after the said period and the user has to go through the process again.
Read more on how Proof of stake will transform the digital currencies.

I don't know how I missed your post? As you see I try to answer to every post or straight question in this thread.

Thanks for this link, great read. Something new for me and I have to say that I was not aware of.

Everything is evolving and new updates articles like this one published with the newest updates about the subject.

This is new tech and is obvious that we have to adjust our knowledge frequently.

[wwzsocki]

...I don't agree with that. There are both advantages and disadvantages of both systems but PoW is more secure...

Of course both POW and POS have advantages and disadvantages.

In my opinion, POS is better because do not need so many resources like power and mining equipment additionally is much younger as POW.

I am open to talk about this subject with you.

[MrFreeRoMan]

This is a great article about PoW and PoS

Consensus Mechanisms Explained: PoW vs. PoS

Proof of Work vs Proof of Stake: Basic Mining Guide




 

[wwzsocki]

If anyone is interested in POS and masternodes, I have just updated my other post about how to set up a masternode.

This is a complete set with screenshots and all steps one by one.

You do not need any special computer knowledge, Linux or Ubuntu or any other special programs.

(GUIDE) Node, full node, masternode. How to set up one and make money from it?