With Bitcoin’s emergence as a new currency and initial transaction, it allows both factions to experiment with different methods. If you are just starting out with Bitcoin trading, this site will help you to do bitcoin trading safely and easily. The below-mentioned portion aims to prove the case for proof of work and then discuss what both sides must gain from adopting ‘evidence of stake’ procedures.
Proof of Work (pow)
Proof of work is not new to the Bitcoin protocol, but its inclusion has been controversial since its inception. Theoretically, it is more secure than proof of stake in that miners can utilize their computer power instead their centralized data centers. However, several problems are associated with this method, and Bitcoin’s early adopters quickly recognized the software’s design flaws.
For starters, mining is completed using an SHA-256 function that utilizes brute force proof-of-work (PoW). While people can argue that this method has served Bitcoin well thus far, it also serves as an excellent example of how not to design a digital currency protocol.
Proof of Stake (PoS)
Proof of stake is already in place for significant cryptocurrencies such as Ripple and Dogecoin. These digital currencies implemented their proof-of-stake algorithms because their blockchain networks were growing exponentially and required more processing power than their original proof-of-work protocols could provide. In proof of stake, miners are still responsible for validating transactions and building blocks in the chain.
However, there is no competition for resources or hashing power like that found in proof-of-work. One significant difference between proof-of-work and proof-of-stake mining is that the former allows miners to be paid in their currency. It has yet to be implemented at a larger scale because it’s against most crypto moderators’ profit margins.
Proof of stake mining allows individuals to ‘stake’ their coins by leaving them in a wallet with open connectivity to the internet. The benefits of proof of stake are that it uses minimal energy and processing power and can be used on any scale without being gridlocked by centralization issues. In addition, proof of stake doesn’t require an extraordinary amount of resources (much less than proof of work), but it requires hardware connected to an internet connection. More than that, proof-of-stake mining is similar to investing in the market. Even if many investors had ditched Bitcoin in favor of Ripple, they would still have to give Ripple some money to maintain its network.
At this point and time, there is no one-size-fits-all protocol that Bitcoin can use to become widely adopted. However, the protocol diversity has served digital currency well thus far, making it less reliant on government regulation or centralized banking institutions.
PoS or POW: Which is better for bitcoin?
In the early days of Bitcoin, most users believed in digital currency and wanted it to be decentralized. But as the underlying technology behind Bitcoin has grown and matured within the cryptocurrency space, one common thread has emerged: The need for a method that is both secure and scalable can no longer be ignored.
Both methods have benefits.
Proof-of-work is better suited for smaller transactions than proof-of-stake, but PoW requires a lot more resources (by some estimates, around 300 times more) to mine blocks than PoS does. Depending on the implementation of these protocols, both solutions could be used by people in tandem. The protocol diversity has served the digital currency well thus far, making it less reliant on government regulation or centralized banking institutions.
Debate on POW vs. PoS:
The bitcoin community has been divided over the POW vs. PoS debate in recent months. Some believe PoS is more energy efficient at processing transactions and would provide a real-world use for tokens like Dogecoin and Litecoin. On the other hand, POW supporters believe that PoS is more vulnerable to being gamed by large investors and that these protocols will never handle the number of transactions that Bitcoin can.
Regardless of the financial benefits or setbacks associated with each protocol, there are some real-world use cases for both. For example, the positive benefits of proof-of-stake are that it doesn’t require an extraordinary amount of resources (much less than proof-of-work), and companies can use it on any scale without being gridlocked by centralization issues. On the other hand, proof of stake doesn’t require an extraordinary amount of resources (much less than proof of work), but it requires hardware connected to an internet connection.
Ethereum bringing PoS:
Ethereum’s proof-of-stake protocol has been a major topic of debate by cryptocurrency enthusiasts and community members. First, there had been some debate and a need to clarify whether Ethereum’s protocol was considered proof-of-stake (PoS). People later found that Ethereum only qualifies as a POW in its current state but is still looking to move over to PoS in the future.
The consensus that Ethereum is a POW blockchain could explain why the ETH network came to a virtual standstill during the recent Ether hackathon. But the Ethereum merger will also bring proof of stakes in the Ethereum network.