Proof-of-Work (PoW) and Proof-of-Stake (PoS); An Intro to The Blockchain Consensus Mechanisms
We all can agree that most people nowadays are just jumping into the crypto world because of all the hype, without knowing any basic thing about the crypto and blockchain mechanism. And this can be quite risky because the scammers are always on the lookout for newcomers in the crypto world, especially for those who aren’t much aware of all the backend works.
That’s why it’s always best to do complete homework to be on the safe side. Yes, we know that the crypto world is a little complex but learning and exploring can make everything good, even for a novice. So here we are with a basic intro of the two consensus mechanisms used in the blockchain network. Let’s dive right in.
Blockchain Consensus Mechanisms
We all know the purpose behind blockchain and cryptocurrencies right, to decentralize financial systems and put an end to third-party involvement like banks. This is where a consensus mechanism comes in. Something was needed to verify the transactions so for that purpose, Blockchain makes use of consensus mechanisms to allow the community or network to verify the valid transactions.
The two currently used consensus mechanisms are Proof-of-Work and Proof-of-Stake shortly known as PoW and PoS respectively. When Satoshi Nakamoto introduced Bitcoin almost 10 years ago, he made use of the PoW consensus system. Whereas PoS is the latest consensus system and also fulfills some of the shortcomings of the first one like energy consumption etc. That’s the reason, many blockchain projects are shifting from PoW to PoS and some new projects are using PoS even to begin with.
One more consensus system that is being introduced nowadays is Proof-of-Time. Although it's new and young, it has a lot of potentials and is bound to rise in the coming days.
Down below is a detailed intro of the two main consensus systems, PoW and PoS.
Proof of Work
We know that Blockchain is based on community and network, right? And the network’s users’ ability to verify that a computational task is done and completed is basically what Proof of Work is. Some mathematical calculations are involved and to answer such mathematical equations, a node is used, which is just like a physical device to work on the data across networks.
Blockchain has blocks of data and every time an equation is solved, a block is verified. All of this process is generally known as mining and the equation solvers are actually miners. This way, transactions are verified using Proof of Work.
A big problem here is the energy consumption issue because a lot of electricity is used by miners to solve such mathematical equations. To lower such big lumps of consumption, a new system Proof-of-Stake was introduced in 2011. Let’s get to know all about it.
Proof of Stake
According to this consensus system, a transaction’s validation only requires that the user shows proof of owning a specific amount of crypto tokens. In other words, the miner with the highest stakes would be prioritized to do the validation of the transaction.
This way, PoS solves the problem of high electricity consumption in the mining process because the electricity is spent by fewer miners. This way, PoS also increases the number of transactions done at a time.
Now we know how blockchain handles decentralization without having to involve any middlemen in the financial game. Hope you understood the basics of the backend story of blockchain and how it works.