What is the difference algorithm Proof of Work of Proof of Stake? | Business Biceps

What is the difference algorithm Proof of Work of Proof of Stake?

By Vera Cryptocurrencies, ICO 1 Comment on What is the difference algorithm Proof of Work of Proof of Stake?

Greetings, friends! We continue to acquaint you with the world of cryptography and cryptocurrency. Today I would like to talk about security protocols Proof of Work and Proof of Stake. What is the difference between them and the transition from one to another can affect the world of mining. As always simple and interesting words. Go!

Offering run through the main steps characterizing blockchain Mining and an example Bitcoin network. So, all the transactions taking place in the network, must be confirmed. Uncommitted transactions are placed in the unit. To confirm the transaction miner must sign a block, which is then recorded in blockchain.

Proof of Work

Now, let’s consider the algorithm verification of transactions and the creation of new units, called – Proof of Work. Imagine that all transactions are pieces of cryptographic puzzle that come together and create a block. The solution to this puzzle (block) is called mining.

How to earn a miner?

To sign a block with uncommitted transactions, miners must calculate the hash. I calculate it, miner creates a new unit and receive remuneration in the amount of 12,5 BTC. Remuneration for the signing of a new block, decreased every 4 years. At the beginning of the creation of Bitcoin network, it was 50 BTC.

How the system determines the miner signed a new unit?

Each miner who wants to create a block, is working on a very complicated computational task. The complexity of the network which is chosen so that on average the solution was 1 per 10 minutes. If the number of miners increased, the problem is complicated. Therefore, the chances of each participant to solve the problem in 10 minutes, decrease. The more miners computing power, the greater its chances of success. Miner, who first solves the problem, and calculates a hash sign a new block and receives an award.

So, what do we have?

Proof of Work algorithm provides high-quality protection. There has never been a single case of hacking Bitcoin network. However, this algorithm has a huge minus, performed work requires very high electricity costs. Keeping up with new blocks of mining industry has turned into an insatiable monster energy. And it is to solve this problem and algorithm Proof of Stake was developed.

Proof of Stake

Proof of Stake translated as proof of ownership. In this algorithm, no miners. People confirming the transaction and creating new blocks are called – validator.

Consider the hypothetical example

Suppose you have a block that you want to sign, and there are 4 validator. Each validator is making their money in blockchain to get the opportunity to sign the block.

The first validator has the most coins, and makes 40%. Making a second validator 25%, the third 20%, and, finally, the latter contributes 15%. With the algorithm Proof of Work the chances of signing of the block depends on the processing power that you have. But Proof of Stake algorithm works differently. The more coins you have, the more chances you have to sign a new block.

After a randomly counts, the system selects one of the validators and he signs the block. But for this action validator does not receive the new coins, he receives all the commissions for transactions that were recorded in this block.

Advantages Proof of Stake

Proof of Stake algorithm has some obvious advantages.

  1. No electricity consumption. When using the Proof of Stake resources are used in the blank. Computer, though, and should be included, but it does not carry out complex calculations and therefore does not consume a lot of electricity.
  2. There is no need to increase the computing power.
  3. The need to have a larger share of tokens available protects against network attacks. If an attacker will buy coins, their value immediately react to it and begin to actively grow. And it will make further buying tokens is extremely unfavorable.

If someone would still be able to collect on the balance of fortune, the risk of attack by the victim of his own attack, because stability of the system will be broken.

Now you know how the algorithms Proof of Work and Proof of Stake. Subscribe to our social networks (links in the footer of the site), so as not to miss the information about new articles and projects.

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