Crypto Academy Season 3 Beginners' course - Task 4: Different types of Consensus Mechanisms

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(1) What is the difference between PoW & PoS? Advantages & Disadvantages? Which one is better in scaling Capacity? Examples?

(2) What is the difference between PoS & DPoS? Advantages & Disadvantages? Name a few Blockchain projects which use the DPoS consensus mechanism and indicate the scaling capacity?

(3) Name a few Blockchain projects which use dBFT in combination with other consensus mechanisms? Indicate the scaling capacity? Explain dBFT along with the pros and cons?

What is the difference between PoW & PoS?

There are various Consensus mechanism in blockchain but all of them have serves the same purpose which is to ensure that each record is very true and honest but the main difference is the method the consensus is reached. But for today, we will basically look at the PoW and PoS. Though they are three.

(Proof of Work) POW

In PoW system, which simply mean Proof of Work , in this system all the transactions data is stored in blocks which is approved by having people solve a complicated math problem which is attached to it. This is usually done by very powerful computers and it is known as mining.

Cryptocurrency is been rewarded to the first miner that cracks or solves the Mathematical puzzle. for example, imagine a car door, that has a code that is unknown to many people, they are all trying at the same time to open the car door at the same time and the first person to open it will get rewarded with cryptocurrency.

Usually digital currencies like Bitcoin and some cryptocurrencies uses the PoW mechanism. this is how it works in blockchain, whenever someone activates any transaction in the blockchain, it quickly goes into the unconfirmed pool, the people that tries to solve the that validity of the transaction is called the miners, The first people to get it correct gets a reward and it is being added to the block.

Any other attempt will be invalid, because only just one is needed. The speed varies from network to network, it is usually 10 mins in the bitcoin blockchain, while 2.5 mins for litecoin . Simply it you can mine a coin depending on how much brain work that is done by the miner. Normally In PoW, the payout is usually small and even get smaller for bitcoin miners. Incentives are usually small because of the 51% attack.

(Proof of Stake) POS
In PoS system, which is known as Proof of Stake, which is an alternative to Proof of Work, In this situation the person that creates a new block which is known as a validator is chosen randomly based on how much they commit to the network, which means the higher the stake that is placed, the higher the chance of you be picked.

For lets say in a sport betting scenario, And many people came to do sport bet, the person that is likely to win is the person that will bet in different stake many times, more than the person that just bets only one. There are other wonderful examples, but the higher you stake the more you are closer to win. In this case your mining capabilities is not dependent on your brain work but the amount of the coins that you are holding. The POS usually makes the 51% attack more expensive.

Advantages of PoW

• You are being reward for how effective your brain works
• Spamming and malicious behavior are easily dictated using PoW
• It also provides additional security to a whole network.
• it can be very suitable for many applications.

Disadvantages of PoW

• There is a decrease for payout in bitcoin miner using PoW, because of they want to avoid the 51% attack
• Proof of Work normally needs a very high computing power, which will need expensive hardware.
• There is a high need for more electric power
• There is a lot of money to spent in purchasing this hardware.
• PoW is usually time consuming

Advantages of PoS

• PoS usually process transactions faster compared to PoW
• There is no need for Expensive hardware
• Pos is usually energy efficient which means that it consumes lesser energy
• You really don't need to experienced technically in staking

Disadvantages of PoS

• It is mostly for the rich, because they have more money or cryptocurrencies.
• The Decentralization system is being reduced because it is somehow monopolistic in nature, the higher your stake, the higher your chances of winner
• The PoS makes any 51% attack very expensive
• The security Model has not been tested as compared to the PoW
• The Rewards are usually lo because of mining cost

Which one is better in scaling Capacity? Examples?

Scalability simply refers to the how many amount of work that the system that handle in a given time between the Proof of Work And the Proof of Stake, The Proof of Stake is more scalable compared to Proof of work. The higher transaction that occurs using the PoS Algorithm, make it the blockchain more scalable and also by getting a good latency with less computation, storage and bandwidth makes it more scalable and a notable projects that already been adopted some examples includes

• DASH cryptocurrency
• Byzantine Fault Tolerance (BFT)

Conclusion

In conclusion, There are various Consensus mechanism in blockchain which includes the proof of Work and the Proof of Stake. In Proof of work, mining a block is totally on the basis of how much work is been done by the miner while Someone can mine depending on the number of coin that is been held by the person. They are both good with their disadvantages and advantages. but when kit comes to scalability, PoS is of higher advantage with examples like Dash cryptocurrency and Byzantine Fault Tolerance (BFT)