Proof of Work or Proof of Stake (PoW vs PoS)?

In the cryptocurrency community, there is a wide debate as to which consensus mechanism is better: PoW or PoS. This raises important issues such as network security, sustainability and decentralization. In fact, both mechanisms have flaws. Before deciding which is best for a particular blockchain network, it is vital to understand the trade-offs between each. In this article, we take a closer look at what proof-of-work and proof-of-stake are and discuss the positives and negatives of each. Which is better: PoW vs PoS?

What is a consensus mechanism in Crypto?

Cryptocurrencies are known to be decentralized. This means that they do not need a central entity to manage their activities such as approving transactions and securing the network and ledger. All this happens thanks to the consensus mechanism implemented on the net. Basically they help count all transactions that happen instantly, rejecting the “bad” or “suspicious” ones.

Proof of work And Proof of stake are two well-known consensus mechanisms. While Bitcoin and Ethereum run on PoW, the latter plans to switch to PoS during its highly anticipated “merger”.

Celo Blockchain

What is Proof-of-Work (PoW)?

Proof of Work is a consensus mechanism on a decentralized blockchain. Represents cryptographic proof that a specific miner was able to solve a complex calculation to verify a transaction. Once done, the miners send the confirmation data to the nodes on the blockchain, then add the new block to the chain.

Senate debate on Blockchain power grids: pow vs pos

PoW Advantages

  • Established cryptocurrencies using PoW have a very low probability of having a 51% attack. This is because attackers require immense computing power which is very expensive and, in turn, renders the attack useless.
  • Large intermediaries will not have a large impact on the governance of PoW cryptocurrencies, contrary to PoS networks, where the large custodians of the coin supply can influence the governance of the protocol.
  • PoW miners have an incentive to be geographically distributed and decentralized. This is because electricity is a major concern for miners, who seek to pursue low energy costs and cheap energy around the world.

Disadvantages PoW

  • The consensus is quite heavy on energy consumption, opening up many debates with global warming fanatics.
  • Small cryptocurrencies using PoW are subject to “51% attacks”.
  • Miners are constantly required to upgrade their equipment as competition grows stronger as the difficulty of the mining network becomes more difficult.
  • In times of network congestion, tariffs become relatively high on PoW networks.
pow vs pos: mining platforms

What is Proof-of-Stake (PoS)?

Proof of Stake is also a consensus mechanism on decentralized blockchains. Instead of having miners solve complex calculations (ie people running their computers and wasting energy), users who own the native coin “lock” it or “stake it” in pools. In this way they participate in the PoS protocol. This mechanism eliminates heavy processing by selecting validators based on the number of coins they have wagered using specific factors. Imagine a public company that wants to start a new product and one of the owners will be the lucky person to say what the product is. In this case, the largest shareholder will choose the product. However, in the PoS consensus, there is a much fairer algorithm that makes this selection less centralized by not selecting the largest shareholder each time.

pow vs pos: cryptocurrency safe

Benefits PoS

  • Network protection with PoS requires 99.9% less power consumption than PoW.
  • It is not necessary for validators to invest a lot in “mining equipment”, but rather invest more in the coins themselves. This provides a low barrier to entry for stakers.
  • Validators can remove attackers from the network and “destroy” their staking coins, thereby reducing the risk of a “51% attack”.
  • Proof of Stake consensus is much faster and more efficient than Proof of Work.

Disadvantages PoS

  • PoS is still a work in progress. It’s not properly tested like PoW, which has been running for more than a decade.
  • Since owning more coins gives more power in a PoS network, users who own large capital will have more control over a network. This makes PoS more prone to centralization.
  • Instead of purchasing a “mining rig” for the PoW network, validators will still have to pay to participate in the PoS network.

What is BETER: Proof of Work or Proof of Stake (PoW vs PoS)?

There is no definitive consensus mechanism. Both PoW and PoS have their strengths and weaknesses. However, we now know that PoW offers better decentralization and greater security. On the other hand, PoS offers faster, more efficient and more scalable transactions. It all comes down to the use case of the blockchain itself. If blockchain is to become the next gold, PoW could be the better alternative as it provides decentralization and security in preserving wealth. However, PoS is arguably more desirable in cases like smart networking and provides a solid infrastructure to other Dapps and Web3.0 enabled websites, as it is in dire need of fast transactions and scalability.


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