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Proof Of Work Vs. Proof Of Stake
Proof Of Work ideology was first introduced in 1993 to combat spam Emails while, In 2011, a Bitcointalk forum user called Quantum Mechanic proposed a technique that he called “Proof Of Stake.”
Proof Of Work
The technique went largely unused until Satoshi Nakamoto used it for Bitcoin. He realized that this procedure could be used to reach a consensus between many nodes on a network, and he used this as a way to secure the Bitcoin blockchain. The proof of work mechanism works by solving a cryptographic puzzle; the puzzle is solved by miners, and the first one to solve the puzzle gets the miner reward.
Proof Of Work gives more rewards to better and more equipment. Having a higher hash rate gives you a higher chance to create the next block and receive the mining reward. To increase chances, further miners come together in mining pools. They combine their hashing power and divide the premium evenly across everyone in the pool.
Proof Of Work is causing miners to use vast amounts of energy, and it promotes the use of mining pools, making the blockchain more centralized as opposed to decentralized.
Proof Of Stake
The basic idea was to shift from the ideology of letting everyone compete with each other with mining is wasteful, so instead, he proposed using an election process in which one node is randomly chosen to validate the next block, proof Of Stakes has no “miners” but instead “validators,” and it doesn’t allow people to mine new blocks but instead mint new blocks.
Validators aren’t chosen in a completely random manner; to become a validator, a node has to deposit a specific amount of coins into the network as a stake. The size of the stake deposited determines the chances of a validator being chosen to forge the next block.
If a node is chosen to confirm the transaction on the next block, he’ll have to verify if all the transactions within it are valid. If everything checks out, the node signs out on the block and adds it to the blockchain. As a reward, the node accepts the fees that are associated with the transactions inside this block. To build trust among validators, validators lose a part of their stake if they approve a fraudulent transaction.