If the title seems confused, it is not surprising. I was trying to be creative and find a series of words that could express the way I perceive that most will react after learning the subject of the article.
For what I want to discuss with you guys today is a very debated topic.
One that could shake the ground of the inner workings of cryptocurrency: which consent algorithm is betterProof of Work (PoW) or Proof of Stake (PoS)?
PoW vs PoS vs DPoW vs DPoS
PoW and DPoW represent the same way of mining, in terms of infrastructure, but in different organizational formats. The first presupposes that a person or company is the owner of the hardware. The second presupposes a network of people who give their computational power to a central authority that draws on their behalf. And then you also have cloud mining.
There are other ways to make mines, like mining contracts where you buy some hashrate from a mine, but I will ignore them because they simply represent a loan of equipment (like a lease).
What about the property?
If we consider the working mechanics of "D" (delegated) in both PoW and PoS, it simply means that you renounce the right to control your hashing power, in order to obtain greater profits – since the extraction through a pool it is much more profitable to dig yourself (if you can not invest a lot in equipment, that is); As mining pools have more hashing power, you'll receive bitcoin blocking bonuses and transaction commissions more often, even if the prize is split across multiple participants.
For the purpose of this article, I will make two hypotheses:
(a) Our goal is to focus on network security; so the best consent algorithm will be the safest.
(b) For consistency of analysis, the ownership of hardware is always preferable due to fewer dependencies.
By combining both hypotheses, we can reach a rapid conclusion.
The Ultimate Battle: PoS vs PoW
If ownership is always preferable, we can assume any option where a user renounces power in making decisions, is tilting his goals to profits. Therefore, its values are not the same as other miners: to protect the network.
If the real battle is between hardware owners, we can eliminate any delegated system, as there is a central point of error.
In different systems, we can add additional levels as many delegates, even if the main problem remains: the authority is not properly distributed because delegates can easily collude to stay in power.
If one of the parties has the ability to easily make changes to a network, there is a central point of failure, which should be avoided at all costs, not only to preserve decentralization, but to ensure the nature without permission of the network.
Safety and speed
We can therefore limit our decision to PoW or PoS. Both have advantages over each other, but in the end one should be safer than the other.
Ultimately, decision makers could choose, depending on the ultimate goal: safety or speed? Robert Greenfield of ConsenSys explains this dilemma quite well:
PoW– The process of solving a computational challenge imposed by a work trial protocol is called (block) mining. And has a objective consent protocol, where a new node can arrive independently at the same current state of the rest of the network based exclusively on the rules of the protocol.
PoS– The process of solving a computational challenge imposed by a test of the stake protocol is called (block) coining. It is not an objective protocol. IS weakly subjective, since a node needs a recent state in addition to protocol rules and messages propagated through the system to independently determine the current state of the system.
The arguments against PoW
Most people point out that the worst aspect of PoW is the way it wastes energy to extract new blocks, however, given my approach to the topic, I would prefer to focus on alternative attack vectors, as I do not there is waste of energy – if we compare the Bitcoin infrastructure with the global gold infrastructurewe can conclude quickly Bitcoin is spending 10% or less of its physical counterpart. Furthermore, the number of users is not related to the number of miners in the sense more Bitcoin users do not match more miners.
What other problems can we examine?
- DoS attacks – A DoS attack aims to interrupt the normal functioning of the network by flooding the nodes with requests (PoW is more vulnerable to this situation).
- Sybil Attacks– The attacker interrupts the network by forcing a certain number of nodes to behave badly. (again, PoW more vulnerable to this type of attack).
PoW is really weak against these two types of attacks, and we have already seen some networks hijacked by both.
Furthermore, PoW is a slower process for consent. If we are not talking about a level 1 solution (like Bitcoin), we can potentially give up speed security by adjusting the way the network reaches consensus.
Instead of doing complex calculations, why not ask network validators to wager some coins in good faith?
Arguments against the PoS
While in a PoW network, the system is divided between miners, developers and other crucial members of the community, on the other hand, in a PoS network stakeholders have the power to make any changes they deem appropriate without the full consent of the communities, companies, miners and developers.
This centralization of voting power and network control defeats the purpose of a cryptocurrency based on the distributed register, since it contradicts its entire principle of distributing all the elements within the network, to decrease the presence of a & # 39; central authority and a central point of bankruptcy.
Considering the bottlenecks and merits of the PoW and PoS systems, this last one seems more inclined to centralization, which is what a cryptocurrency network must avoid at all costs. Despite its advantages in preventing the 51% attack, PoS carries its own risks, which should be avoided by a truly decentralized network. A type of attack that can be easily executed in PoS, which is more difficult to perform in PoW (if not impossible in larger networks like Bitcoin) is a attack to be corrupted:
- Initially, the attacker performs an expense transaction that he later wishes to reverse,
- Immediately thereafter, the attacker secretly creates a chain based on the block preceding the one containing the transaction.
- When the transaction gets the necessary number of confirmations and the attacker's chain is longer than the valid chain, the attacker publishes it as a whole.
- The new chain is accepted as a valid blockchain and the transaction is therefore reversed.
Nonetheless, PoS allows the development of faster consensus algorithms, since no energy is required to provide job tests, which means that a protocol can easily scale the number of transactions per second or add new pointing nodes simply by lowering the required mail .
The main difference is that PoS allows higher throughput and performance, allowing additional use cases.
The Ultimate Tie-Breaker: Network Security
At the beginning of the article I made two hypotheses, one of which was a shout out to focus our needs on securing the network.
Speed and interchangeability are incredibly important features, which should come after we are sure to rely on a secure infrastructure that can not be changed or manipulated.
For me, without questions, PoW is the most secure consensus mechanics out thereand we should not aim to replace it so soon.
The discussion on efficiency does not really matter for the level of security. We want an effective, inefficient network.
The fact that tons of energy are spent just to protect the Bitcoin network should surely make many of us happy.
It means that anyone who wants to attack the network must spend the same amount of energy to redo all the work done.
Yes, it becomes literally impossible to change the past!
That connection does not exist when we consider the PoS systems. Because users are not doing any work to find a hash, there is no real cryptographic security, as energy is not spent by the stake out nodes. The only thing an attacker needs to do is buy enough coins to perform a 51% attack.
Does it make sense to apply PoW to every single cryptocurrency infrastructure?
Speed and interoperability
One of the key arguments for the adoption of cryptocurrency is the need to make the system faster and easier to use. In addition to the best UX / UI, we must certainly focus on building scalable systems, with scalable infrastructures and consensus mechanisms.
If you're looking to learn more about PoS live use cases, my advice is to examine projects that use this technology properly.
One of my favorite examples is QTUM; it actually uses a PoS consent algorithm in a live, decentralized and unauthorized protocol, which can be extracted by anyone tapping 1 QTUM or more. Better yet, at the moment it has more than 5,000 active nodes distributed in 3 continents.
I love the idea of decentralization, in the sense that I really believe that having multiple levels with alternative goals is how cryptocurrencies will develop, as each level should perform different tasks.
We can have a central protocol to manage money, as well as others to manage smart resources in different sectors such as supply chain, gambling, land register and so on.
If we bet on many integrated protocols, very good at carrying out a specific task, we will adopt a strategy from the past that seems to have worked. Just look at the hardware components and IoT devices!
Small protocols will open the way for adoption,I discuss, all integrated and working together to achieve the same goal.
In a sense, having many components working for the same goal, it becomes easier to work on each one separately; if correctly implemented (for example, having tolerance to Byzantine errors), even when a component breaks, the system as a whole still works.
Here is where I see the projects of crypto-projects: in a future of cooperation, as well as competition.
Thanks for reading!
Leave your comments and thoughts below.
Disclaimer: this article is not a financial advice; represents my personal opinion e it should not be attributed to CCN. I have some savings invested in cryptocurrency, so take everything I write with a pinch of salt. Do not invest what you can not afford to lose and always read as much as possible on a project before investing.
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