PoW vs PoS

[amishmanish]

Also if POS consumes less energy, then wouldn't it be a good idea for Bitcoin to transition to a POS algorithm?

Research what a Perpetual Motion Machine is, that’s what Proof of Stake truly is. Plus the mere possibility of considering that Proof of Stake could replace Proof of Work, is someone who has not truly taken the time to understand how Bitcoin’s incentive structure works, and WHY it works.

Its not like that PoS doesn't take any energy. So while it may not be a PMM, they surely are centralized when it comes to being crypto. All of this talk about "validators" happens because ultimately, you need computing power to bundle transactions into blocks and propagate them. That is why all the so-called "PoS nodes" have requirements like 64 GB RAM, Multi-core processors etc etc. A lot of them are even permissioned in the sense that you have to contact some central authority to run the nodes.

I see them not as cryptocurrencies but simple blockchain based databases that are run by certain corporations. Whenever transactions rise, the corporation simply buys up more cloud servers or just set up dedicated hardware of their own. Quite clearly, the people who want to use smart-contracts for lending and borrowing don't mind this as long as they get returns fuelled by speculation and Bitcoin's bullrun.

PoS has a market now and i think it'll have a purpose until regulation reins them in and only Banks can run these services. Bitcoin's PoW ensures that it just remains to be money and the only truly uncensorable exchange medium on the internet.

[pinggoki]

Proof of Stake works in a different manner than Proof of Work. Yes it is a much efficient energy-wise and a much faster system for large-scale cryptocurrencies like bitcoin, but it would also require the consensus of multiple computation systems that will be unified under one single server. If everyone would be willing to chip in some of their computational power and unify it through the cloud, then proof of stake would work. Proof Of Work eliminates the middle man by allocating a dedicated computational system where transactions will be facilitated, this is of course only applicable for small forms of cryptocurrency with little potential for scalability.

Bitcoin is PoW, it is in the whitepaper. However, if everybody agrees, yes bitcoin may switch to PoS as well but I don't think it is going to happen. Some people say PoS is not as safe as PoW and we still don't know if this is right. Eth and cardano doing well so far. So maybe, the hesitations might be baseless.

Bitcoin too is doing fine with PoW, it ensures security and robustness of BTC blockchain. The issue of too much power consumption by bitcoin is as old as hills and IMO its just over hyped. Eth has not switched over to PoS yet as,
Altair, Ethereum 2.0’s first hard fork, is expected to come into effect by the end of the month —  the point where the original proof-of-work Ethereum blockchain will transition to Ethereum 2.0’s proof-of-stake consensus mechanism. Source

Whether its PoW or PoS, they both are same way of climbing the same mountain. As PoW is centralized along miners that can afford expensive mining equipment and electricity bills, in PoS those who can stake huge amount of coins will grab the major share of mining.

When the last bitcoin is mined/bought, it would be harder for everyone to facilitate transactions more so afford them because the system will be overloaded and as a countermeasure, will charge higher fees and would slow the process down for the rest in queue. The thing about POS is it ensures efficiency of service and the price of each transaction which in theory should work, especially for coins with high potentials for scalability like bitcoin and ethereum, with these two being the most common victims of the shortcomings POW has.

[blatchcorn]

When the last bitcoin is mined/bought, it would be harder for everyone to facilitate transactions more so afford them because the system will be overloaded and as a countermeasure, will charge higher fees and would slow the process down for the rest in queue. The thing about POS is it ensures efficiency of service and the price of each transaction which in theory should work, especially for coins with high potentials for scalability like bitcoin and ethereum, with these two being the most common victims of the shortcomings POW has.

Blockchain has trilemma in terms of scalability, security and decentralisation. If we talk about PoW, then it has performed well under the umbrella of BTC. It has scalability issues but its secure and ensures decentralisation of btc. While we have yet to see PoS working under a decentralized coin like Ethereum.
After the last btc will be mined, there will be a fee that will be paid to miners as reward. Like I said PoW has scalability issues but still with this issue btc manage to grab over 1 trillion usd cap. I m very much sure PoW can manage the load after last btc is mined as its tested under extreme load.

[pooya87]

Why wouldn't it happen? If enough consensus raises, anything can happen.
If PoW becomes unsustainable, I am pretty sure PoS will be the next step but that's one big if.

It is like saying "if enough consensus gathers we will censor bitcoin"!
There are certain principles in bitcoin that will never change, one of the most important ones is security which will be removed if PoS replaces PoW.
All you could say is that if PoW becomes problematic a new but better algorithm will replace it but it definitely won't be PoS.

The migration of miners from China mainly to the US

I still haven't seen any proof of this apart from what the news sites said and a single study with unverifiable data. I'm not saying this is or isn't true, but we simply have no evidence.

it was because of a political issue.

US isn't so friendly to bitcoin either. I'm sure that if it continues to grow and specially start threatening US dollar they will start cracking down hard.

Since then, the price of energy there has been rising in the US. I suppose some will be considering going elsewhere if it continues to rise, but there are many factors to take into account:

It wasn't since then though. US and Europe have been having some energy problems and with increasing gas prices the electricity cost has been rising for some time now.
In fact this is one of many reasons why I have trouble believing that Chinese miners moved from Asia (that has a lot of countries with super cheap electricity and friendly to bitcoin) to US (that has higher electricity price that is increasing and is not as positive towards bitcoin).

When the miners left China many had to sell Bitcoins they had been holding and there was a downturn in the market.

Nobody "had to" sell bitcoin, and it wasn't miners. It was traders and weak hands and they panic sold which is part of market manipulation that happens every now and then for different reasons!

2) They cannot move to a place where the energy is cheaper but there is legal insecurity that makes it possible for the government of the day to prohibit mining in a few months, in addition to confiscating equipment and other measures.

Let bitcoin be used in a couple of big international trades replacing USD and the US miners will see what "legal insecurity" really means when they get raided in the name of "national security"

[lumierre]

I know Bitcoin is running on a proof of work consensus algorithm. Recently I discovered proof of stake by reading up a bit on Cardano and Ethereum's 2.0 plans.

What is the difference between these two, how does POS reduce the energy required to mine a block transaction and are either of these more secure than the other? Basically what are the pros and cons of each.

Also if POS consumes less energy, then wouldn't it be a good idea for Bitcoin to transition to a POS algorithm?

The key difference between Proof of Work and Proof of Stake consensus is that miners in PoW are to confirm transactions and add to blockchain this way they get rewards while validators in PoS are to lock up (stake) their coins and they get reward for this in coins that they stake. The more you stake, the more you earn. And in terms of PoW, who has solved the problem first gets rewards.

[Tash]

.............
The key difference between Proof of Work and Proof of Stake consensus ............

The key difference between Proof of Work and Proof of Stake
Proof of Work = miners are like a notary witness a transaction and sign it
Proof of Stake = is like banks, money transmitters, receiving a payment and routing it to the receiver ('touch' it for a split second)

[Pmalek]

<Snip>

You are forgetting countries such as Russia or Kazakhstan. Some miners surely migrated there as we can see from the increase in hashrate in those territories. It's closer to them than USA is and presents a decent alternative.

Packing up and leaving the country and the continent to go to the US to mine Bitcoin isn't as straightforward as many think. They are people with families and children who live and work in China. It's not that easy to leave all that behind. You need to purchase or rent a location from where you will mine in a brand-new country with unfamiliar laws and language (maybe). The equipment that consists of thousands of miners has to be packed up and shipped overseas. This is also expensive and requires additional paperwork and time.

[pooya87]

<Snip>

You are forgetting countries such as Russia or Kazakhstan. Some miners surely migrated there as we can see from the increase in hashrate in those territories. It's closer to them than USA is and presents a decent alternative.

Packing up and leaving the country and the continent to go to the US to mine Bitcoin isn't as straightforward as many think. They are people with families and children who live and work in China. It's not that easy to leave all that behind. You need to purchase or rent a location from where you will mine in a brand-new country with unfamiliar laws and language (maybe). The equipment that consists of thousands of miners has to be packed up and shipped overseas. This is also expensive and requires additional paperwork and time.

Very good points indeed.
Another important factor that has been overlooked is that the US-China relations are terrible, they are even speaking of world war 3 these days! Why would Chinese miners migrate to US in this situation when there are closer countries some of which are China's allies.

[franky1]

as for the shift in price.

imagine it this way

take it as a percentage
say 40% was in china at $0.04
say 10% was in khazahkstan at $0.05
say 20% was in america was at $0.12
say 30% was in europe was at $0.18

the average would be 9.9cents per %
now lets take out china

say 40% was in khazahkstan at $0.05
say 30% was in america was at $0.12
say 30% was in europe was at $0.18

the average would be 11cents per %
so although this is demo numbers and % per region is not accurate(random demo numbers). it just demonstrates the average is now 11cent

what you actually find out is this though
instead of 40% (chinese) willing to sell coin based on a low cost of $0.04% . meaning 40% would sell bitcoin real cheap if the price was to crash.
now its a situation of in this demo only 30% willing to sell at the next price point as the MINIMUM anyone willing to sell

so the situation is simple. if we imagine that the thousands of asics needed to mine in china led to say a combined cost of hardware, facility, labour of say $20k. ($4k being electric)

khazahkstan would become the next lowest cost. whereby facility, labour hardware is $22 and electric $5k makes the lowest cost mining now $27k instead of $24k

and as said instead of china 40% willing to at worse case sell down to $24k..
the newer situation in this demo. now has the lowest sentiment now being only 30% wanting to sell down to $27k worse case

[Pmalek]

Another important factor that has been overlooked is that the US-China relations are terrible, they are even speaking of world war 3 these days! Why would Chinese miners migrate to US in this situation when there are closer countries some of which are China's allies.

Good point! Still, it's important to always make a distinction between the people and the governments. The relationships between those in power are bad, but unfortunately, it's the little guy who suffers the consequences. Those appointed to make decisions impose sanctions that don't affect them that much.

The averagely intelligent and educated American don't see the Chinese people as their enemies, and vice versa. Negative thoughts are born when your existence and job security is threatened. Based on recent events, Chinese miners can't and shouldn't have positive things to say about the actions of their government.   

[franky1]

Another important factor that has been overlooked is that the US-China relations are terrible, they are even speaking of world war 3 these days! Why would Chinese miners migrate to US in this situation when there are closer countries some of which are China's allies.

actual relations with china are not bad at all. its the media perception thats bad.
did you know that while media news were screaming that china is an enemy. THOUSANDS of businesses were shaking hands with china.
yep right now this second there are mcdonalds, kfc, nike, and pepsi and thousands of brands happily working in china. the media perception does not like US business going to china, but they cant stop it. so instead media presents china as a bad place to go to. yet business sees a new customer base of 1.3 billion people and if they can just earn $10 per person they can earn $13billion from china.

US media has been screaming WW3 with china for longer then most of us have been alive. yet everyday we all trade and work with the chinese.

Good point! Still, it's important to always make a distinction between the people and the governments. The relationships between those in power are bad, but unfortunately, it's the little guy who suffers the consequences. Those appointed to make decisions impose sanctions that don't affect them that much.

The averagely intelligent and educated American don't see the Chinese people as their enemies, and vice versa. Negative thoughts are born when your existence and job security is threatened. Based on recent events, Chinese miners can't and shouldn't have positive things to say about the actions of their government.  

large asic farms can afford to move. its the residential hobby miners that are stuck. they are the ones told to just stay in place but shut down and stop working in mining coin

[Nhazwrath]

I know Bitcoin is running on a proof of work consensus algorithm. Recently I discovered proof of stake by reading up a bit on Cardano and Ethereum's 2.0 plans.

What is the difference between these two, how does POS reduce the energy required to mine a block transaction and are either of these more secure than the other? Basically what are the pros and cons of each.

Also if POS consumes less energy, then wouldn't it be a good idea for Bitcoin to transition to a POS algorithm?

Part of the problem here is the assumption that energy usage Is the problem.   That is the re framing the question by people who want to continue to control all money.  < Thats a complicated topic by itself.  Most people wont even see it due to the fact that they just repeat the question.  Once you are just repeating the question you've lost control of the topic. 

POS systems are inherently centralized systems.  Thus very few people are in control of the system.  The less people in control those systems means the human factor which is inherently flawed will at some point cause it to break or corrupt in some manner. 

POW systems tend to be A Lot less centralized and the human factor Tends to be less of a problem.  But its not a perfected system. Case in point would be Vitaliks reversal of a large transaction a few years ago. Despite ETH being POW Vitalik has centralized control. He doesn't exercise it but its there. The fact that its there proves that the human corruption faction is Very possible with ETH.  ETH moving to POS simply increases that problem.

Bitcoin Has No single person or small group able to do such a thing, thus its value.  At some point in the future due to Pareto distribution problems there will be in my opinion too few people in control of bitcoins processing power thus it might as well be centralized.  But that day hasn't arrived and cannot be worried about a problem that hasn't occurred yet.

I am very sure lots of people smarter then me are thinking about this problem.

[franky1]

bitcoin mining does not have a centralisation problem

take antpool which for half a decade was smeared as being "china" truth is antpool as 3 stratums. one china, one american one european. so china cant exactly just shut antpool down.
all antpool need to do is change its website/server. a 2 second job, and business as usual if authorities came knocking.

as for mining farms. they suffer from what is known as facility limit. they can only house a certain amount of asics per building. again no pain for them. they can have several buildings. even less pain the buildings dont even have to be at same location. they can simply remote control which 'work' to sent to each building no matter the location.

as for the pareto problem. bitcoin is different. although the top 3 pools have most the hashpower. the hashpower is not all their own. its users voluntarily linking to that pool. and users if they see their pool getting to 50% most see their 'slice' of the reward get thinner and thinner.  and so they pool jump

there is however a 'class divide' problem
where home hobby miners with 1-3 asics due to residential limits on electric circuits. and affordability of only a couple low efficiency asics (s9) mean that their daily income per kwh is less than say a mining farm

this is also shown as a divide because say for instance an s9 at 14thash. vs an s19pro at 110thash has a 8x efficiency of hashes for only 2.5x of electric draw... the hardware price however is not in the 3-8x area.

it costs more then 8x price of a s9 which prices people out of gaining in the electric efficiency
.


lastly. as for the PRICE.
people keep forgetting the bitcoin price is never and has never been based on all coins in circulation.
most(all currently) price movements are not movements caused by people having to own a whole bitcoin to put that whole bitcoin on a orderbook to sell at the whole bitcoin price just to trigger a movement.
instead people are making orders of 0.001($60) and making the price move a bit at a time. so the price does not need whales with hundreds of bitcoins
yes it would be good to have all the whales put in 'beached whale' orders(walls) at sat $55k so that no matter how many sellers want to sell they will never devour a $55k wall
but my point is the bitcoin price is not based on masses of coin

[Nhazwrath]

bitcoin mining does not have a centralisation problem

take antpool which for half a decade was smeared as being "china" truth is antpool as 3 stratums. one china, one american one european. so china cant exactly just shut antpool down.
all antpool need to do is change its website/server. a 2 second job, and business as usual if authorities came knocking.

It currently doesn't,  I totally acknowledge that it may never be a problem.  But Humanity is the one buying and selling thus the reality of the Pareto distribution says otherwise.

[Leviathan.007]

As @Dave already mentioned in the first posts there are already many topics about POS and POW and in these topics, you can easily understand the difference between these two but if you want to have a real short definition let's say the pow algorithm works whenever you mine the coins using physical miner devices or your personal computer and in this method any miner should stay online during mining to get the clocks confined while in pos you won't need any devices and not even a simple computer, you coins are mining for you and you will earn more share if you have more coins for staking, Tron can be one good example of pos coins.

[The Sceptical Chymist]

this makes altcoins with PoS have no underlying value in its coin creation. thus reliant on value from the features of what that coin can do/be used for after the creation to keep the coin active/alive.

I disagree with that first statement, since there's essentially the same "intrinsic value" for both PoW and PoS coins, which is what you wrote in your second statement, i.e., they're worth whatever people are willing to pay for them based on various factors.  I don't buy that whole "bitcoin is backed up by all the work and electricity involved in their creation" argument.  I never did, because it makes no sense to me.

The good thing about PoS coins is that you can earn income from them, which isn't the case with bitcoin.  And a few of them are useful for their smart contract functionality and so forth.  The main problem I see with them in terms of their utility as currency is that people are incentivized to hold them and not spend them--and that also isn't true for bitcoin.

You have to admit, PoW coins do use up a lot of electricity, even if it's a small amount compared to other things.  I happen to like the idea of being able to mint new coins simply by running a wallet, but I'm also aware that that particular feature can lead to centralization of the coin if the majority of them are in the hands of whales. 

[pooya87]

actual relations with china are not bad at all. its the media perception thats bad.
did you know that while media news were screaming that china is an enemy. THOUSANDS of businesses were shaking hands with china.
yep right now this second there are mcdonalds, kfc, nike, and pepsi and thousands of brands happily working in china. the media perception does not like US business going to china, but they cant stop it. so instead media presents china as a bad place to go to. yet business sees a new customer base of 1.3 billion people and if they can just earn $10 per person they can earn $13billion from china.

US media has been screaming WW3 with china for longer then most of us have been alive. yet everyday we all trade and work with the chinese.

You are completely changing the discussion. I'm not talking about a franchise with a huge chain everywhere deciding whether to open a new shop in another country.

We are talking about a small business known as bitcoin miners that have a dozen options in front of them to migrate from China to one of them. I'm saying that for such miners there are lots of much better options available compared to US for many reasons that I mentioned earlier one of which was political relations.

Otherwise you are right about other stuff, China has US economy by the balls and talks of WW3 is a joke mainly because US military has been a joke for at least 60 years.

[songchunlai]

Pow will give every share of computing power an equal opportunity to become the master of the Bitcoin system.

[franky1]

this makes altcoins with PoS have no underlying value in its coin creation. thus reliant on value from the features of what that coin can do/be used for after the creation to keep the coin active/alive.

I disagree with that first statement, since there's essentially the same "intrinsic value" for both PoW and PoS coins, which is what you wrote in your second statement, i.e., they're worth whatever people are willing to pay for them based on various factors.  I don't buy that whole "bitcoin is backed up by all the work and electricity involved in their creation" argument.  I never did, because it makes no sense to me.

maybe if you take a break. sit back and relax for like 30 minutes and realise.. PRICE IS NOT VALUE

many people think the only thing that exists in life is the price. one point of measure. one level..
however this is not true.

the PRICE is made up of layers. like a sandwich

PoS is a meatless lettuce and tomato sandwhich...
PoW is a BLT of bacon lettuce and tomato

yes both have lettuce and tomato. but your missing out on the bacon
the underlying value is the bacon..
the lettuce and tomato is the supply demand sentiment

imagine gold. as explained before.. the cost of the diggers, the labour, the diesel the sluice machines the licences of water/land rights. all form an undeniable underlying cost.
however treasury bank notes. have no real cost. its like a quarter of a penny to print a piece of paper smaller then a post card

notice the difference
yes a $2k bank note and a $2k gold nugget both have the same PRICE. but their values are different.
people would rather have the nugget. as the paper bank notes price wont be as good in 20 years as a nugget

a bank note in 20 years will buy less loaves of bread than a nugget would

take anything. fruit. bread.. dont ever look at it as just the retail price.. learn and understand the wholesale price the manufacturing cost. then you will start to see if different items are being sold at excessive profit or at good value. never judge value based on retail price but based on how much they are skimming off customers from the underlying cost

[nelson4lov]

The thing with PoS is, it promotes hoarding and lets the few people with huge number of coins control the blockchain. It requires little to no electricity in generating a block, yes, but the security of the network lies on the hands of the few people having tons of coins on their disposal. For PoW, complicated mathematical algorithms ensure that the network's security is always at its prime, and in order to beat the algorithms in place and rewrite even a small portion of the blockchain, one must have spent an immense amount of resources (electricity, time, and money) before they can achieve it.

Bitcoin IMO will not switch to such an algorithm any time soon. It will still keep PoW as it remains to be the most ideal algorithm in terms of security for bitcoin.

POW has the best security available but comes with certain tradeoffs as you've mentioned. Even POS has its own benefits and shortcomings. A POW chain is very expensive to run and that's why even ethereum is going POS mode soon. Why I don't like longer transaction finality and high tx fees, I do like the security and level of decentralization achieved on Bitcoin compared to other chains where users delegate to validators.