Proof of Work (PoW)
The probability of mining a block depends on the work done by the miner. So the amount of work to be done is totally depends on the computing resource possessed by the miner.
In PoW: Do some work to mine a new block, consumes physical resources, like CPU power and time, power-hungry.
Proof of Stake (PoS)
The amount of bitcoin that the miner holds instructs which miner can generate the next block. So if a miner holds one percent of the total bitcoins, then the miner can mine one percent of PoS blocks.
In PoS: Acquire sufficient stake to mine a new block, consumes no external resource, but participate in transactions, and power-efficient.
Other variants of Stake
- Randomization in the combination of the stake concept, which is used in the Nxt and BlackCoin based cryptocurrency. The idea is that you apply a randomization function and, based on that system, decide who will be the miner who will generate the next block.
- Coin-age concept: The number of coins multiplied by the number of days the coins has been held, and this concept is used in Peercoin. To participate in the Peercoin system, apart from holding a sufficient amount of bitcoins, users also need to ensure that they hold those bitcoins for a certain duration. This way, if the users collect a huge amount of coins from participating in mining. Immediately, they will not be able to participate in the mining procedure. That way, this cryptocurrency prevents the case when a user makes a huge number of transactions for gaining bitcoins to mine more blocks.
Proof of Burn (PoB)
The miners need to prove that they have burned some coins. In this context, burned means they have sent coins to a verifiable un-spendable address so that no one can spend those coins.
In PoB: Burn some wealth to mine a new block, consumes virtual or digital resources, and power-efficient.
Proof of Elapsed Time (PoET)
Each participant in the blockchain network waits a random amount of time, and the first participant to finish becomes the leader for the next block. Intel proposes it as a part of Hyperledger sawtooth – A blockchain platform for building distributed ledger applications.
Comparisons of PoW vs. PoS
The system provides more protection than PoW, as executing an attack is expensive because the adversary must hold more bitcoins to generate more blocks. If an adversary already holds a huge amount of bitcoins and generating an attack on the blockchain network, he will be most affected because he is holding a majority of the bitcoins. So that way, the attacks are more expensive in a PoS based system.
Comparisons of PoW vs. PoW
In PoW, the miners have to invest in Physical resources like computational power, computational time, electricity bill, and money to purchase computational hardware.
In PoB, miners have to spend digital or logical resources such as coins. The miner has to spend certain coins to participate in the mining procedure to show that they have interest in the mining procedure. If a miner (attacker) wants to attack this system, the attacker actually has to lose a huge amount of coins.
At the same time, this particular system is power efficient because there is no utilization of physical hardware to do the work. Rather than spending digital currencies for that, and that is why although it is expensive like proof of work, it is efficient in terms of power consumption.
Bitcoin context for PoS or PoB
The main idea is that once the PoW mechanism gets saturated, no more bitcoins will be rewarded to the miners that are the way bitcoins generate in the bitcoin network. There won’t be any motivation to do mining. However, to run the entire ecosystem, the system may gradually adopt proof of stake or proof of burned-based mechanism.
Summary
We have seen Proof of Work, Proof of Stake, Proof of Burn-based mechanisms, and comparisons in this note.
References
- NPTEL lecture series on Blockchains Architecture, Design and Use Cases by Prof. Sandip Chakraborty, IIT Kharagpur.
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