Proof Of Work Vs Proof Of Stake What Is Pow & Pos Mining?
If youre currently invested in the cryptocurrency market, then its important to gain a perspective on how cryptocurrencies work under the hood. If youre a newer cryptocurrency investor and have begun to take a look at some of the various information resources regarding how digital currencies work, then youve probably come across one or both of the following terms: Distributed consensus simply means a large pool of people who are geographically segregated agreeing on something. In cryptocurrencies like Bitcoin, something here means agreeing on which transactions or blocks are valid and which are invalid to be added/rejected to the blockchain. Consensus methods are extremely important in the world of cryptocurrencies . Its essential for cryptocurrency investors as well as technical users to understand the mechanisms that drive digital currencies. In this article, well break down the difference between Proof of Stake and Proof of Work and explain how they function to help you gain a greater understanding of how cryptocurrencies work. Many newer cryptocurrency investors become frustrated when attempting to understand the meaning of these terms, as explanations are often needlessly complex. In reality, however, these terms are relatively simple to understand if explained correctly. Both Proof of Work and Proof of Stake are two different kinds of computer algorithms that are responsible for the extreme success of digital currencies such as Ethereum and Bitcoin . Essentially, these two cryptocurrencies are the most popular and valuable in existence today due to these two different algorithms. These algorithms are used to achieve what is referred to in the cryptocurrency world as distributed consensus Proof of Work, or PoW, is a computer algorithm that is used by a number of d Continue reading >>
Proof Of Stake Is Coming, And Will Be A Game Changer
Proof of Stake Is Coming, and Will Be a Game Changer Join our community of 10 000 traders on Hacked.com for just $39 per month. Proof of Work mining (the protocol underpinning Bitcoin and many others) uses as much energy as the nation Denmark. Its a costly and lengthy process, and with the user base growing traditional blockchains are struggling. This is because every single transaction needs to be mined by powerful computers solving complex mathematical problems. Its a process that ensures the security of the network, preventing double spends and other malicious actions. Whilst effective, the energy inefficiency of this process is truly staggering. And thats not all. With each transaction needing a lengthy confirmation process, the blockchain cannot scale easily as more and more users join the network. Bitcoin transactions are now unbearably slow and expensive, with long backlogs of transactions waiting their turn. Ethereum too is suffering from the same issue. Although the network can currently handle around fifteen transactions per second, significantly more than Bitcoin, we need only look at the recent Cryptokitties mania to see the crippling effect of high network load. Backlogs of transactions quickly built up and transaction prices skyrocketed as users fought to get included in the next block.With the severe limitations proof of work seen, it seems impossible for real-world use cases to succeed. VISA and other non-blockchains handle thousands of transactions per second, and if the many projects emerging in the crypto space are to compete, something needs to change. Vitalik Buterin, mastermind of the Ethereum system, aims to introduce what is known as a Proof of Stake this year. The upgrade to the network is known as Casper, and it promises to be a game changer. Continue reading >>
Explaining How Proof Of Stake, Proof Of Work, Hashing And Blockchain Worktogether
ConsenSys BSIC CTO, @Goldman Alum, @Cisco Alum, @TFA Alum, Activist, Intense Autodidact Explaining How Proof of Stake, Proof of Work, Hashing and Blockchain WorkTogether Many of you may have heard about Proof of Stake, specifically that Ethereum is moving toward a hybrid model using Proof of Stake and Proof of Work. But of course, the same lot of you probably asked, What the heck is Proof of Stake really? Lets dive into that. There are, currently, two main Blockchain systems that the larger crypto-networks utilize: Both of these Blockchain systems govern how transactions are verified on the decentralized network. So before we explain what Proof of Stake is, we need to explain how Blockchains are formed. Take a look at this video to better explain the fundamental parts of a Blockchain. You can play around with making (conceptual) hashes, blocks, and blockchains here . What is a Hash? A hash is the result of a hash function or a function that simply takes data and converts it to an almost-unique, fixed size 256-bit (32-byte) string of numbers and letters. Heres an example: SHA256 + Hello World = a591a6d40bf420404a011733cfb7b190d62c65bf0bcda32b57b277d9ad9f146e Try this here. As you can see, even a small change in the initial data will completely change the hash! SHA256 + Hello Worl = 12fec4c65dd4455c48aff8977a7cd8ccb97539ad4cd7c37f13cf71ba8bee9a98 What is a Block? A block is a group of transactions in chronological order (or the best chronological order that the miner nodes can agree and organize the transactions in). Every block has, as its data, the hash of the previous block. Each block is made of a Block Header and a Block Body. The main way of identifying a block in the blockchain is via its block header hash. The block header hash is calculated by running the block Continue reading >>
Proof Of Stake (pos)
Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has. The first cryptocurrency to adopt the PoS method was Peercoin . Nxt, Blackcoin, and ShadowCoin soon followed suit. The proof of stake was created as an alternative to the proof of work (PoW), to tackle inherent issues in the latter. When a transaction is initiated, the transaction data is fitted into a block with a maximum capacity of 1 megabyte, and then duplicated across multiple computers or nodes on the network. The nodes are the administrative body of the blockchain and verify the legitimacy of the transactions in each block. To carry out the verification step, the nodes or miners would need to solve a computational puzzle, known as the proof of work problem. The first miner to decrypt each block transaction problem gets rewarded with coin. Once a block of transactions has been verified, it is added to the blockchain, a public transparent ledger. Mining requires a great deal of computing power to run different cryptographic calculations to unlock the computational challenges. The computing power translates into a high amount of electricity and power needed for the proof of work. In 2015, it was estimated that one Bitcoin transaction required the amount of electricity needed to power up 1.57 American households per day. To foot the electricity bill, miners would usually sell their awarded coins for fiat money , which would lead to a downward movement in the price of the cryptocurrency. The proof of stake (PoS) seeks to address this issue by attributing mining power to the proportion of coins held by a miner. This way, instead of utiliz Continue reading >>
The Inevitable Failure Of Proof-of-stake Blockchains And Why A New Algorithm Is Needed (op-ed)
The Inevitable Failure of Proof-of-Stake Blockchains and Why a New Algorithm is Needed (Op-Ed) One of the driving factors behind cryptocurrency is the fact that it is decentralized, meaning that no individual or group controls it. Instead, it is controlled by everyone participating in the particular cryptocurrency's network. One of the driving factors behind cryptocurrency is the fact that it is decentralized, meaning that no individual or group controls it. Instead, it is controlled by everyone participating in the particular cryptocurrency's network. The more people in the network, the more resistant it is to different kinds of attacks. A cryptocurrency itself has no single point of failure, as it would be said in the computer security world. This means that in order for someone to compromise a cryptocurrency as a whole, they would need to compromise more than one aspect of it. For example, let's say that someone managed to break into a single Bitcoin wallet; they have not compromised the network and they have not compromised every Bitcoin wallet. They have only compromised that one Bitcoin wallet and nothing else; the Bitcoin network stays strong! That is the beauty of cryptocurrency! Centralization in Proof-of-Work: 51% Attack Unfortunately for Bitcoin and other Proof-of-Work (PoW) cryptocurrencies, people figured out that if they pool their computing power together for the sake of mining, they can make money faster. I am all for working together, but when it comes to mining a cryptocurrency, only one person can mine a new block at a time; if you attempt to split the reward for mining a new block among multiple miners through the blockchain, you need some proof of their work on the blockchain, which leads to blockchain bloat that nobody wants. So, to effectively po Continue reading >>
Proof-of-stake - Wikipedia
This article may rely excessively on sources too closely associated with the subject, potentially preventing the article from being verifiable and neutral . Please help improve it by replacing them with more appropriate citations to reliable, independent, third-party sources . ( Learn how and when to remove this template message ) Proof-of-stake (PoS) is a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus . In PoS-based cryptocurrencies the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e. the stake). In contrast, the algorithm of proof-of-work (PoW) based cryptocurrencies (such as bitcoin ) rewards participants who solve complicated cryptographical puzzles in order to validate transactions and create new blocks (i.e. mining ). Proof-of-stake must have a way of defining the next valid block in any blockchain. Selection by account balance would result in (undesirable) centralization, as the single richest member would have a permanent advantage. Instead, several different methods of selection have been devised. Nxt and BlackCoin use randomization to predict the following generator, by using a formula that looks for the lowest hash value in combination with the size of the stake.    Since the stakes are public, each node can predict - with reasonable accuracy - which account will next win the right to forge a block. Peercoin 's proof-of-stake system combines randomization with the concept of "coin age," a number derived from the product of the number of coins times the number of days the coins have been held. Coins that have been unspent for at least 30 days begin competing for the next block. Older and larger sets of coins have a greater probability of sign Continue reading >>
Proof Of Stake Bitcoin?
Quote from: CentraTech on July 28, 2017, 03:14:58 AM DO you guys ever think that bitcoin will do proof of stake? Just wanted to get some peoples insights on this. No, because PoS doesn't work as a decentralised consensus. Every single PoS coin is a private club, with trusted owners, much like Visa the company is. When you invest in a PoS coin you are being tricked into thinking you're investing in the future, when actually you're investing something that can never work as designed. DO you guys ever think that bitcoin will do proof of stake? Just wanted to get some peoples insights on this. Unless there was an update through Bitcoins final development there wouldnt be any PoS implemented into Bitcoin because theres already altcoins that feature that concept. There wouldnt be any point for Bitcoin to get a PoS coded into it because Bitcoin is already capped at 21 million coins. Plus, if there was a PoS code placed into Bitcoin then the transactions within Bitcoins Blockchain would be cluttered because there isnt that many miners that can keep up with the competitive mining difficulty that Bitcoin has. If you are spending 0.0001 Bitcoin for transactions you would have to spend much more to get your transactions confirmed. Proof of Stake is definitely superior, that's the reason why ETH will convert to PoS in the future, they are actively working on the conversion currently, with experimental versions already in beta test. But Bitcoin probably won't, Bitcoin is more decentralized, and the forces against PoS in Bitcoin is too strong, the miners will 100% oppose it. It nearly turned into a figurative thermo-nuclear war for getting a 1 line code change to change block limit from 1MB to larger blocks. It's hopeless to change to Proof of Stake for Bitcoin, you might as well for Continue reading >>
Will We See A Future Bitcoin Fork Focus On Proof Of Stake?
No one will deny that the conflicting opinions on how Bitcoin should evolve are quite amusing to follow. The course of action maintained by the Bitcoin Core developers raises a lot of questions and very few solutions to ongoing problems. We have seen hard forks pop up out of nowhere, although Bitcoin Cash is the only one with any sort of traction. According to some users, a hard fork of Bitcoin needs to remove proof of work. Whether or not such a concept is even viable has yet to be determined. We have seen a very interesting discussion on Twitter over the past 24 hours. It all began with Vinny Lingham promoting Bitcoin Cash, which immediately drew a response from Litecoin developer Charlie Lee. Lingham pointed outthat BCH not having SegWit is the main reason why it is superior. At the same time, SegWit paves the way for the Lightning Network, which may finally make Bitcoin useful again. We also cant forgetthat SegWit is a big reason why the Bitcoin community is so fractured right now. Moreover, it seems Lingham is clearly against a user-activated soft fork which changes the economic rules of the system. That in itself is interesting, considering that the UASF had zero impact on those rules whatsoever. Instead, it was the first time all Bitcoin users not just miners could flex their musclesand make decisions. Opinions on this particular matter will always remain divided, though. The conversation tookan interesting turn when someone proposedthat a peer-to-peer network governance modelcould only be achieved through proof of stake. PoS removes the need for mining, which meansthat miners can no longer make the rules. At the same time, there isnothing which dictates that aP2P network consensus model doesnt need miners or would be better off without miners. Both models will Continue reading >>
Can The Bitcoin Protocol Be Based On Proof Of Stake?
Answered Mar 26, 2017 Author has 1.4k answers and 5m answer views Theres nothing on a technical level that would prevent the Bitcoin protocol from moving to POS. Assuming they could create a fault tolerant implementation of POS, Bitcoin could transition to it. However, the chance of Bitcoin moving to POS is almost none because of the politics of the mining community. The six largest bitcoin mining pools control about 95% of the resources on the blockchain. That means that in order for any change to be accepted, these pools have to adopt a new standard no one can force it on them. Right now, their entire workflow is based on POW transactions and is decently profitable. Under a POS system, the new miners (then called forgers) would make significantly less and wouldnt control the blockchain (depending on the implementation). This is very bad for those miners, who have invested significantly in their current setups. The chance of Bitcoin ever moving to POS is almost nil because of this dynamic. Continue reading >>
Proof Of Work Vs. Proof Of Stake Whats The Difference, And Which Is Better?
Youve probably heard of Proof of Work and Proof of Stake but understanding what they actually mean and what the fundamental differences between them are can be difficult. To put it simply, both of these mechanisms are different types of computer algorithms. When explained correctly, they are relatively easy to comprehend. Proof of Work is a system whereby the probability of mining a block is based on how much work is done by the miner. Many altcoins follow this protocol, as it helps to ensure that the authenticity of the chain is correct. The Proof of Work method has one huge pitfall it requires a lot of computing power. The only reason for this requirement is that it protects against spammers and keeps the systems running cleanly. As a result, it is very wasteful. Due to this, many people within the crypto community are in agreement that the Proof of Work method is not an ideal long-term solution. Many are largely in favor of the Proof of Stake method. In the Proof of Stake method, token holders get rewarded with transaction fees in return for validating transactions. Each validator owns some stake in the network. The Proof of Stake method does still have some issues. For example, if a small group of people own the majority of the tokens, they will be the validators. However, it is still evolving. As time progresses, the network will become more solid and robust. There are some significant advantages to using Proof of Stake over Proof of Work. First of all, Proof of Stake does not require significant computational power. As long as your laptop or computer is online, it will suffice. This also makes it more energy efficient, meaning it does not consume extremely high amounts of electricity. Proof of Stake also provides a clear economic incentive for people to hold thei Continue reading >>
Proof Of Stake - Bitcoin Wiki
Proof of Stake is a proposed alternative to Proof of Work . Like proof of work, proof of stake attempts to provide consensus and doublespend prevention (see "main" bitcointalk thread , and a Bounty Thread ). Because creating forks is costless when you aren't burning an external resource Proof of Stake alone is considered to an unworkable consensus mechanism.  It was probably first proposed here by a member named QuantumMechanic . With Proof of Work, the probability of mining a block depends on the work done by the miner (e.g. CPU/GPU cycles spent checking hashes). With Proof of Stake, the resource that's compared is the amount of Bitcoin a miner holds - someone holding 1% of the Bitcoin can mine 1% of the "Proof of Stake blocks". Some argue that methods based on Proof of Work alone might lead to a low network security in a cryptocurrency with block incentives that decline over time (like bitcoin) due to Tragedy of the Commons , and Proof of Stake is one way of changing the miner's incentives in favor of higher network security. A proof-of-stake system might provide increased protection from a malicious attack on the network. Additional protection comes from two sources: Executing an attack would be much more expensive. Reduced incentives for attack. The attacker would need to own a near majority of all bitcoin. Therefore, the attacker suffer severely from his own attack. When block rewards are produced through txn fees, a proof of stake system would result in lower equilibrium txn fees. Lower long-run fees would increase the competitiveness of bitcoin relative to alternative payments systems. Intuitively reduced fees are due to vast reductions in the scale of wastage of resources. If a single entity (hereafter a monopolist) took control of the majority of txn verifi Continue reading >>
Is Proof Of Stake Really The Future For Bitcoin And Altcoins Mining?
Proof of Stake (PoS) is a relatively new concept. For many it is still unclear how will mining work with this concept and what are the risks and advantages. In fact, many known altcoins are already implementing this new alternative to Proof of Work (PoW) mining, such as NXT or Diamond. Here, I will give a brief and simple explanation on what PoS is and what are its advantages and disadvantages over PoW. As many may already know, In PoW mining the chances of a miner finding a block depend solely on it's computing power (hashes per second), and on solo mining, luck may also be a factor to consider. Most major cryptocurrencies use this approach (including Bitcoin and Ethereum), and over the past few years the difficulty has increased exponencially; so much in fact, that mining Bitcoin nowadays is only viable through the use of ASICs ( Application Specific Integrated Circuit). In simple terms, the concept of PoS revolves around the amount of coins that miners possess on the network; the more coins a miner possess, the higher chances he has to find blocks on the blockchain. This amount of coins is the "Stake" a miner places on finding a block. Although not yet fully mature, crypto experts believe PoS will eventually replace PoW mining. Now, what are the pros and cons of PoS over PoW mining? Let's point out some possible scenarios. PoS does not require costly hardware to colaborate to the network; consensus can be reached based solely on the amount of coins each miner has. The "investment" needed for mining through PoS does not devaluate over time. The value of the miner worth is only affected by the changes on the coin value, and exchange rate between other currencies (Bitcoin, USD). PoS is clearly a lot cleaner for the environment than PoW, the former needing only to own c Continue reading >>
What Are The Downsides Of Proof Of Stake?
What are the downsides of proof of stake? I am very skeptical about the security of the proof of stake system. Is it really that secure? Are there no disadvantages? Vanilla proof-of-stake doesn't achieve consensus, unfortunately. People staking their coin can vote for both forks of the blockchain, and can even mine effortlessly in secret. In PoW this is impossible, as you are literally wasting energy by mining both sides of a fork. To mitigate this, most modern PoS schemes use a mixture of PoS and PoW to ensure that someone will finally decide the chain. for more discussion. How exactly would one mine effortlessly on two blockchains? I don't understand PoS at all, so please forgive the noob question. fredsbend Jun 6 '14 at 5:57 But what would be the point of 'betting' on two blocks? Jori Jul 5 '14 at 20:00 Jori: because if you bet only on one, and you bet wrong (the chain ended up not being the longest one), you lose your income. Pieter Wuille Jan 27 '17 at 17:09 Proof of stake has been used for many months in Nxt, and has not been broken despite having the third highest market capitalisation, so it does seem to be secure. If it wasn't, someone would have broken it by now. History shows forks rarely persist for more than a block, so it does achieve consensus. In theory, a weakness is that people can vote for both sides of a fork. In practice, that doesn't seem to happen. The gain from doing so would be trivial (there's no block reward in Nxt), and the loss of security substantial, so no-one does it. With Proof of Stake, the people who secure the block-chain the most are also the people who possess the most coins, so they have the most incentive to preserve the integrity of the currency. To put it another way, in Nxt forging is done to secure the block-chain, not to mak Continue reading >>
Proof Of Work Vs Proof Of Stake: Basic Mining Guide
Proof of Work vs Proof of Stake: Basic Mining Guide Angel Investors, Startups & Blockchain developers... Recently you might have heard about the idea to move from an Ethereum consensus based on the Proof of Work (PoW) system to one based on the so-called Proof of Stake. In this article, I will explain to you the main differences between Proof of Work vs Proof of Stake and I will provide you a definition of mining, or the process new digital currencies are released through the network. Also, what will change regarding mining techniques if the Ethereum community decides to do the transition from work to stake? This article wants to be a basic guide to understanding the problem above. First of all, lets start with basic definitions. Proof of work is a protocol that has the main goal of deterring cyber-attacks such as a distributed denial-of-service attack (DDoS) which has the purpose of exhausting the resources of a computer system by sending multiple fake requests. The Proof of work concept existed even before bitcoin , but Satoshi Nakamoto applied this technique to his/her we still dont know who Nakamoto really is digital currency revolutionizing the way traditional transactions are set. In fact, PoW idea was originally published by Cynthia Dwork and Moni Naor back in 1993, but the term proof of work was coined by Markus Jakobsson and Ari Juels in a document published in 1999. But, returning to date, Proof of work is maybe the biggest idea behind the Nakamotos Bitcoin white paper published back in 2008 because it allows trustless and distributed consensus. Whats trustless and distributed consensus? A trustless and distributed consensus system means that if you want to send and/or receive money from someone you dont need to trust in third-party services. When you use tra Continue reading >>
Proof Of Stake Fork Problem
I have a doubt with Proof of Stake. As I have watched some tutorial videos and websites, there is information that: with Proof of Stake, in order to make a double spending attack, a node has to own at least 51% stake of all the network. Because with pure Proof of Stake, only a single miner can append a block at the same time. So what I wonder here is: with Proof of Stake, how can fork happen to make the double spending attack? a node has to own at least 51% stake of all the network. This is correct. Note: you should own 51% of network, not 51% of emission. only a single miner can append a block at the same time how can fork happen to make the double spending attack? restore from backup and create a private network which is not connected to main network leave your chain mining until the cumulative difficulty become larger than in main network connect your network to main net and force it to reorganize mainchain to your chain where you still have your funds and 100% mining rewards Thank you for your answer, but could you explain for me that without connecting to the internet, how can I know how much is owned by all the network? For example, with nxtcoin, you have to know all the coins owned by the network, so you can choose the next miner by picking a random coin among all the coins. Truong Nguyen Nov 16 '17 at 17:02 Mining blocks in PoS is not "picking (voting for?) a random coin and its respective owner". Sorry, I can not explain PoS here in few words in good English. amaclin Nov 16 '17 at 18:55 Continue reading >>