Proof of work vs Proof of stake
Proof of work vs Proof of stake
A proof-of-work (POW) system (or protocol, or function) is an economic measure to deter denial of service attacks and other service abuses such as spam on a network by requiring some work from the service requester, usually meaning processing time by a computer. The concept was invented by Cynthia Dwork and Moni Naor as presented in a 1993 journal article. The term “Proof of Work” or POW was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels. An early example of the proof-of-work system used to give value to a currency is the Shell Money of the Solomon Islands.
A key feature of these schemes is their asymmetry: the work must be moderately hard (but feasible) on the requester side but easy to check for the network. This idea is also known as a CPU cost function, client puzzle, computational puzzle or CPU pricing function. It is distinct from a CAPTCHA, which is intended for a human to solve quickly, rather than a computer. Multiple miners on the network attempt to be the first to find a solution for the mathematical problem related to the candidate block. The first miner to solve the problem announces their solution simultaneously to the entire network, in turn receiving the newly created cryptocurrency unit provided by the protocol as a reward.
Proof-of-stake was created as an alternative to the proof-of-work (PoW), allowing for a different way to validate transactions and achieve distributed consensus.
Unlike in proof-of-work, where the algorithm rewards miners who solve mathematical problems with the goal of validating transactions and creating new blocks, with the proof of stake, the creator of a new block is chosen in a “random” way based on how many coins one holds, also defined as stake.
The proof of stake concept was initially introduced on a BitcoinTalk thread in 2011 and the first digital currency to use this method was Peercoin in 2012. It was then followed by ShadowCash, Nxt, BlackCoin, Nav Coin and others.
The main advantage of PoS over Pow is that Proof-of-stake coins can be more energy efficient that the ones base on Proof-of-Work algorithms, once it doesn’t require thousands of miners to secure the network. On the other hand many claim that PoS is not as fair as PoW and can lead to centralization and the concentration of power in the hands of a few wealthy individuals/companies.
Ethereum’s founder Vitalik Buterin believes that the advantages of a PoS outweigh the disanvatges. Ethereum has on its roadmap an update called Casper that will move Ethereum from PoW to PoS removing from miners the power to validate transactions and giving it to stakers.
Ethereum’s transition will not be that simple and will take a few more months if not years once there are other technical factors to be considered.
