In the crypto community, there is a widespread debate about which consensus mechanism is better: PoW or PoS. This raises important issues such as network security, sustainability, and decentralization. In fact, both mechanisms have flaws. Before deciding which is best for a certain blockchain network, it is crucial to comprehend the trade-offs between each. In this article, we take a closer look at what proof-of-work and proof-of-stake are, and discuss the positives and the negatives of each. Which is better: PoW vs PoS ?
Cryptocurrencies are known to be decentralized. This means that they do not need a central entity to manage their activities such as approving transactions and securing the network and public ledger. All of this happens thanks to the consensus mechanism deployed on the network. They basically help in tallying all the transactions that happen by the instant, while rejecting “bad” or “suspicious” ones.
Proof of Work and Proof of Stake are two well-known consensus mechanisms. While Bitcoin and Ethereum run on PoW, the latter plans on switching to PoS during its highly anticipated “merge“.
Proof of Work is a consensus mechanism on a decentralized blockchain. It represents cryptographic proof that a specific miner managed to solve a complex computation in order to verify a transaction. Once done, miners send the confirmation data to the nodes on the blockchain, then add the new block to the chain.
Proof of Stake is also a consensus mechanism on decentralized blockchains. Instead of having miners solve complex computations (aka people running their computers and wasting energy), users who own the native coin “lock it” or “stake it” in pools. This way, they participate in the PoS protocol. This mechanism eliminates heavy computing by selecting the validators depending on the number of coins they staked using specific factors. Imagine a public company wanting to start a new product, and one of the owners will be the lucky person to say what the product is. In this case, the largest shareholder will pick the product. However, in the PoS consensus, there is a much fairer algorithm that makes this selection less centralized by not selecting the largest shareholder every time.
There is no ultimate consensus mechanism. Both PoW and PoS have their strengths and weaknesses. However, we know by now that PoW offers better decentralization and more security. On the other hand, PoS offers faster, more efficient, and more scalable transactions. It all boils down to the use case of the blockchain itself.
If the blockchain wants to become the next gold, PoW might be the better alternative as it provides decentralization and security in preserving wealth. However, PoS is likely more desirable in cases such as smart-network and providing a solid infrastructure to other Dapps and Web3.0 enabled websites, as it is in dire need of fast transactions and scalability.
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