The Great Crypto Debate: Is PoW, PoS, Or PoT The Best Blockchain Mining Consensus?
The Great Crypto Debate: PoW, PoS, and PoT
The blockchain industry continues to grow, despite significantly declining prices in most major cryptocurrencies. According to most experts, this is to be expected. Cryptocurrencies are built on the back of distributed ledger technology, and even Blockchain owes much of its success to the blockchain that made it all possible. At its core, the distributed decentralized ledger setup is an incredibly important innovation. In terms of data storage and transaction information distribution, the blockchain is an unmatched technology within the financial tech sector.
But as the industry began to develop and developers took hold of the innovating process, several debates began. In particular, disagreement between proof-of-work and proof-of-stake consensus-achieving mechanisms has driven much of the modern debate regarding cryptography and blockchain technology among experts in the field. The mechanisms do functionally similar things; they are processes by which the system achieves consensus among member parties that the transactions that have happened are legitimate and accurate. Without a valid consensus mechanism, blockchain technology would be much less viable, as disagreements would arise more frequently and create massive technical problems for the entire chain.
In both cases, though, consensus mechanisms like PoW and PoS are essential components of blockchain applications in the traditional sector, especially when it comes to major businesses and enterprises. The applications of blockchain technology for multiple sectors is nearly infinite, but most practical uses require a substantive form of consensus verification to be even somewhat useful for the modern business and their information technology departments.
Proof of work is considered to be the first blockchain consensus mechanism. Introduced first with the Bitcoin blockchain, proof of work allows miners to work to verify each block individually, completing transactions only once the requisite number of blocks have been sufficiently verified by one or more miners. PoW’s biggest advantage is likely its track record. Compared to some of the newer forms of consensus verification, PoW has a proven track record of efficiency, having allowed the Bitcoin blockchain to function for years with relatively few significant consensus-based issues.
But the biggest downside of the PoW system is that it could eventually lead to centralization, as well as a host of other potential logistical and security concerns. Furthermore, the cost of maintaining the PoW system, both in literal monetary value and people power, is higher than with other systems. For this reason, some people argue that PoW might not actually be the most efficient consensus system after all.
The Bitcoin network serves as a perfect case-study for the energy consumption problems associated with PoW verification processes. Globally, the Bitcoin network consumes power comparable to around 700 American homes, generating a massive and troubling carbon footprint.
In many ways the opposite of PoW, proof of stake is a newer technology. As a consequence, it cannot claim the distinguished historical run that proof of stake might have access to. In proof of stake, the mining process functions differently. Users can “stake” coins in amounts proportional to the number of coins they personally own in the given currency. When they stake, users are able to mine and verify transactions.
The main draw of proof of stake is that it can be done on a normal, average computer. As a result, the energy consumption and work associated with the mining process is much significant than PoW can offer. Additionally, the system is efficient in its ability to become more decentralized than other consensus mechanisms. PoS is thought to be significantly less susceptible to the dangerous 50 percent attack, a major fear in many cryptocurrency communities.
A Third Contender
It isn’t just PoW versus PoS anymore, either. Developers very recently came forward with a concept called PoT, or proof of transaction. The PoT system allows users to work together to bolster the network’s security and consensus everyday through conducting normal transactions. Transactions are encouraged, with users being rewarded with block rewards in the future in exchange for conducting significant amounts of transactions on the blockchain.
This system might be perfect for companies that conduct many transactions on a daily basis already. Their use of transactions could help to strengthen the network while providing rewards to the company for their contributions to the network.