Different between proof of work poW and proof of stake poS (ether / blockchain)

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4 years ago

With Proof of Work, computers on the network compete to solve mathematical formulas and win the right to confirm transactions into the blockchain, and thus, secure the network. The two major drawbacks to the PoW protocol is the danger of a 51% attack and the massive energy consumption required for network security. For these reasons, I think that PoW will soon be an outdated system, as blockchain transitions to a new protocol called Proof of Stake (PoS).

Proof of Stake works similarly to PoW except that instead of computers validating the network and receiving rewards equivalent to their relative computing power, PoS uses token holders. Those who hold tokens can “stake” their tokens (staking means to temporarily place the tokens in a locked smart contract — until staking is over) and in exchange, confirm transactions and receive rewards based on the relative number of tokens held. In PoW, if you operate 5% of the total computing power of the network, you can expect to get 5% of the block rewards. In PoS, if you own 5% of tokens, you can also expect to receive 5% of block rewards.

PoS offers a solution to the issues plaguing PoW — mainly it takes virtually no energy to run PoS — without compromising the security. I would argue that it actually improves security. With Ethereum, and all other PoW protocols, the difficulty algorithm (how hard it is to solve the mathematical formula) must constantly be updated to account for better computer hardware and more powerful mining groups. With PoS there is no need to do this. With Ethereum, you could conceivably purchase enough computing hardware to achieve a 51% attack; even after comprising the network, you would still have all of that hardware and could potentially use it to attack other PoW platforms. With PoS, because you must stake your coins, any malicious behavior results in the loss of all staked coins. So if you bought 51% of all tokens, you would immediately lose your substantial investment. In addition, the costs of purchasing 51% of the network tokens are equal for everyone. The costs of obtaining 51% of computer power — due to discounts for mass computer purchases and countries with extremely cheap electricity — are not

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