Proof of work vrs Proof of stake
Hello Fellow steemians and crypto lovers, I want to talk about a topic i have been reading a lot, this help us understand some pro and cons from the cryptocurrencies and also help us decide in which cryptocurrencies we can invest.
One of the principles from the cryptocurrencies is to have a descentralized network, in order to make that real and sustainable a network requires people to get involved and support the blockchain. The networks needs to reach a consensus to approve a transaction and validate it, when somebody mine a crypto (solves the blocks) they receive a reward as an incentive, and there is two type of ways to do that.
This proccess help avoid using a third party to do transactions, because everyone has a copy of all the transactions from the network in a public blockchain. There is no chance to do fraud.
PROOF OF WORK
This was the original way of how the networks were supported. It works with electricity and a lot of computers. The transaction is put into a block, A computer solves mathematical problems, and the first computer that solve the problem will receive a reward, the miners compete to be the first one to solve the block. Once the block is solved it is attached to a chain, thats why its called blockchain, everyone can go to it and verify the transactions.
The problem with this model is the high expense of electricity, this lead to people to join into pools, which comes to the same problem of centralization. China has around of 51% of the mining power of bitcoin, and in the long run this problem can become even worse. Hopefully the Segwit solution will improve the network.
PROOF OF STAKE
This is the other way to mine, one advantage is much cheaper, it doesnt cost as many electricity as Pow (Proof of work) which makes more sustainable the network. Basically is that transactions are confirmed when miners lock up a certain amount of their coins to verify that the transaction has the same amount. The calculations to solve are much easier. This proccess need a parameter of randomness so all people have the chance to mine and help the network.
Problem with this one is that only a few people could have an important percentage of the coins, having a kind of monopoly in the network, which comes again with the centralization problem.
For the moment there are many cryptocurrencies that are taking the Proof of stake model, because its cheaper and easier, and friendly with small miners, in my opinion this is a better way to support the network, making it faster and with less fees on transactions .
Thoughts?
Regards