Difference Between The two Consensus Mechanism (PoS vs. PoW)

Key points

  • Difference between PoS and PoW

The consensus is a fault-tolerant mechanism, used on blockchains systems and computers. It is a useful process in record keeping.  

In the context of blockchains, the two most prevalent consensus blockchain mechanisms are Proof-of-work (PoW) and proof-of-stake (PoS). On the Bitcoin network, the consensus mechanism used is the PoW consensus mechanism, which requires high computational power for solving a complex puzzle to keep all nodes on the network honest.

In PoS, the responsibilities of maintaining a public ledger are allocated among the nodes based on the currency tokens held by it. It is considered as an alternative to PoW, as it requires low cost and low energy.    

To elaborate on the two consensus mechanisms, a comparison between the two is drawn.

Difference between PoS and PoW

In the case of PoW, the blockchain network is completely safe, but for this high security, there is a high cost involved. 

All the nodes in PoW are required to participate in the transaction validation process, which causes issues of scalability in the network. With the growth in the network scalability will reduce as now even more nodes will be required to validate the transaction. 

The increase in the complexity of the puzzles, and the need to solve them will only reduce the transaction throughput. Bitcoin users pay fees to the miners so that their transactions could be included in the next available block. With the increasing complexity of the puzzles, the competition among the miners to include transactions in the next available block will only become stronger. This will also increase the fees.

The increasing complexity of the puzzles is making it difficult for the miners to continuously upgrade their system to solve the puzzle and also pay the energy bill.   

To achieve economy of scale mining pools are developed by miners, where there are combining their computational power to solve the puzzle. 

In the PoS consensus mechanism, ‘nodes’, also known as ‘stakers’ are required to stake their crypto tokens for transaction validation. There is no requirement for all the nodes to participate in the transaction validation process and there is also no puzzle to solve. A staker will be chosen for the transaction validation process, based on the number of tokens staked. More the tokens staked and for a longer duration, more is the probability of being chosen for transaction validation. 

In PoS the process of transaction validation is called ‘forging’ as there is no mining and all coins have already been created. This helps in improving scalability and transaction throughput. 

Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.

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