Cryptocurrency

Kraken report explores what’s superior — PoW or PoS

a study A deep dive into Kraken’s Proof of Work (PoW) and Proof of Stake (PoS) mechanisms reveals that neither is “better” than the other, but that they have unique characteristics that can enhance certain types of blockchain protocols. discovered.

This report examines the ability of PoW and PoS consensus mechanisms to withstand Sybil attacks.

Sybil attacks are aimed at manipulating multiple accounts, nodes, or computers to gain control over an entire network. Her most common Sybil attack in the crypto space is her 51% attack, where an attacker attempts to take over at least 51% of all nodes to control the entire network. Since decentralization is at the heart of blockchain, resistance to Sybil attacks is very important.

Both PoW and PoS mechanisms require nodes to invest in the network, so we are confident that the nodes will run an honest and decentralized system.

According to the report, the PoW mechanism has a market dominance of 58%, while PoS’ is 12%. However, this does not mean that PoW is better than PoS.

proof of work

The PoW mechanism requires computational power to solve mathematical problems for mining blocks. Miners invest hardware and power into their operations and are rewarded with block rewards for mining legitimate blocks.

strength

  • PoW systems have actually been tested much more than PoS mechanisms, as they are the dominant consensus mechanism in the crypto space.
  • PoW blockchains are particularly resistant to 51% attacks because taking over more than half of the nodes is too costly. An attacker cannot earn enough to cover the power and hardware costs of occupying more than his 51% of nodes, so it’s often not worth the effort.
  • Working with governance protocols is particularly difficult even with PoW mechanisms. One node counts as one vote for him, making it difficult to force consensus across the network. This is not possible with his PoS network, where users with the highest amount of stake may have an edge in government decisions.
  • Also, PoW systems, by design, discourage forks. PoW miners invest power in their mining operations, so in the case of a fork, they don’t risk mining, thinking that the forked chain may not hold up. Forks are fairly easy in a PoS system, as PoS miners can easily bet on both the original chain and the forked chain to double their earnings.

weakness

  • Environmental impacts are a concern as PoW mechanisms rely heavily on power consumption. Miners also need to continually update their mining equipment in order to keep producing at maximum efficiency.
  • Small PoW networks are 51% more susceptible to attacks. This is because the cost of taking over half of the nodes is affordable.
  • Since all nodes operate anonymously, it becomes impossible to detect malicious nodes or prevent them from joining the chain.

Proof of Stake

PoS systems rely on locked-up coins to operate their networks. Instead of consuming electricity and operating hardware, PoS miners participate in the network by staking coins. Each time, the network randomly selects among the actively staking nodes to verify the validity of the transaction and generate the next block.

strength

  • PoS networks require little energy and are much greener than PoW networks. This is the main motivation behind Ethereum’s recent integration with the Goerli testnet. PoS networks also do not require computing power, thus eliminating the need for miners to update their mining equipment.
  • Since the PoS network relies on staked coins, it is able to isolate identified malicious nodes. In addition to preventing them from joining the chain again, the network can also confiscate their staked coins as a penalty.
  • The PoS system eliminates competition for mining blocks by randomly selecting block validators, increasing efficiency.
  • Overall, PoS networks do not require much power or special hardware, making them easy to join. This will lower the barrier to entry and allow more people to access his PoS network.

weakness

  • PoS networks are a relatively new technology and have not been tested as well as PoW networks. Certain of her PoS networks may be vulnerable to attacks in the future.
  • The node with the highest amount of staked coins will get an edge in the governance vote. Therefore, PoS blockchains are more likely to be centralized.
  • PoS networks generally have a low barrier to entry, but some PoS blockchains require a large initial investment to become a node. This prevents the network from growing and turns it into a centralized blockchain.

PoS for scalability. PoW for decentralization and security

Considering the strengths and weaknesses of both protocols, the report concludes that neither is perfect against Sybil attacks. I have.

Based on its properties, PoW networks offer strong decentralization and security. It is more extensively tested, difficult to centralize and discourages continuous forks. PoW networks are better suited for use cases like hard money than PoS networks as they do not allow the richest to take over the network and offer more security.

PoS networks, on the other hand, are much more energy efficient and a better solution for networks that focus on scalability. The network randomly connects nodes to speed up the process, and honest nodes can block malicious nodes from the system. PoS networks benefit most for use cases involving smart contracts.

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