Reasons Why You Should Prefer PoS over PoW Consensus Algorithm

Since the day Blockchain technology has proven to be something beyond cryptocurrencies, almost every business enthusiast, tech researcher, and developer has shown an interest in getting familiar with its basics.

They have started exploring the Blockchain domain to understand its underlying architecture, the associated concepts like Consensus Algorithms, Tokenization, and more that make it succeed in providing a decentralized environment.

Now, while exploring the world of blockchain consensus algorithms, one question that is hitting almost everyone’s head is: How is PoS better than PoW? The questions whose answer we will unveil in this blog.

But firstly, let’s refresh our knowledge about what exactly the two terms mean, i.e, PoW and PoS.

What is Proof of Work (PoW)?

Introduced by Satoshi Nakamoto, the founder of Bitcoin, Proof of Work (PoW) is the consensus mechanism where participating nodes have to solve a complex mathematical puzzle with the help of different mining methods. These methods include CPU mining, GPU mining, FPGA mining, and ASIC mining.

The one that finds a solution to the puzzle at the earliest gets a block as the reward.

However, it is not as easy as it seems. With every puzzle solved, the complexity level of the next puzzle increases; making it even more tough to solve in the least time.

In such a scenario, the participating nodes have not just focus on solving the problem faster than others, but also ensure that the new block is created within a specific time frame.

Some of the cryptocurrencies that are relying upon this Blockchain consensus algorithm are Bitcoin, ZCash, Litecoin, Monero, and Primecoin.

What is Proof of Stake (PoS)?

In Proof of Stake (PoS) consensus mechanism, unlike PoW, the block producers are not miners. But they act as validators.

They keep some amount of funds at stake in return for getting a chance of creating a block. This way, they prevent others from wasting their time and effort into the process of building a block. Also, unlike PoW, they do not receive any reward but are provided with a transaction fee.

The PoS consensus model is widely used by developers to build Blockchain solutions like Dash, Reddcoin, Decred, and PivX. In fact, the consensus model has also become the first preference of Ethereum, something about which you can learn in detail in this blog on the Ethereum 2.0 update.

With this covered, it is likely that you wish to dive deeper into the Blockchain arena and see how PoS overrules PoW.

But, wait!

To know how PoS is leading the show, it is good to be familiar with where PoW is lagging behind. Meaning, sussing out the challenges app development companies have to face while considering PoW for their Blockchain development needs.

What are the Challenges You Might Face with PoW?

1. The 51% Risk

In the PoW mechanism, if the controlling entity owns 51% or more nodes in the Blockchain network, it gets the power to create a block. This might sound normal but can produce a risk of corruption if the controlling entity opts wrong practices.

2. Higher Resource Consumption Rate

Miners, in this case, consume a higher amount of energy and resources to solve the mathematical computational puzzle, with only one receiving the reward for their investment.

So, it is again challenging to operate with the PoW model when the resources available are limited.

3. Time Consuming

To solve a particular mathematical puzzle, miners have to check for various values. This process demands a higher investment of time and effort.

4. No Instant Results

In the case of the PoW consensus model, miners take some time to mine the transaction, get it confirmed, and commit it in the blockchain model. Because of this, the results are not attained instantly.

While these were the challenges that were restricting app developers from touching the sky of the Blockchain world, let’s see how PoS prove to be a perfect solution to this. Or better say, get an insight into how PoS is better over PoW.

How PoS Solves the Challenges in the Blockchain Development World?

1. Security

In the case of Proof of Work (PoW) consensus algorithm, when a blockchain is forked, miners are given a choice to pick between the two chains for their further investment. However, it is not so when talking about PoS. 

The Proof of Stake (PoS) mechanism enables validators to operate on both the original and forked blockchain without increasing their stake. 

2. Decentralization

Unlike PoW, the amount of network control is directly proportional to the amount invested in the mining process in the PoS consensus mechanism. Higher the amount they invest, the higher is the ratio of they being in control. Something that introduces the concept of decentralization and transparency into the process.

3. Time-Saving

Since only a limited number of resources are allocated the process of creating and validating blocks, the time associated with the mining process gets lower down. Meaning, while a certain group of validators focuses on creating a node, others can continue with other tasks.

4. Cost-Effectiveness

In the case of the PoS mechanism, no large machines or other heavy resources are required for computing. This lowers down the cost involved with the process and makes it 

So, as we have covered in this blog, PoS solves the prevailing challenges associated with PoW and opens new doors of flexibility, scalability, and revenue generation. But if you are still confused if PoS, the proven alternative of PoW, is the right consensus algorithm to meet your blockchain app needs, consult with the best Blockchain developers today.