PoW vs. PoS – What’s The Peoples Choice?

PoW vs. PoS – What’s The People’s Choice?

Because Bitcoin and cryptocurrency is still so new, it’s hard to say conclusively what ‘customers’ actually want. And even if one wanted to venture an opinion (like I will here) it’s still important to remember that blockchain and cryptocurrency is not a totally homogeneous market and there certainly are different niches within the overall market too.

But if you are, or plan to be, a cryptocurrency user one thing you most likely do want is security and speed. That’s where these two terms, Proof of Work (PoW) and Proof of Stake (PoS) may confront you.

When I started hearing those words, it seemed like they were important. Since the definition wasn’t really specified in the context where I heard them, I did some searching. Here’s what I found. I’m not a guru in this stuff but I think this is pretty accurate:

First of all, remember that blockchain is an algorithm (albeit a very unique one). Within and around the Bitcoin algorithm there are peripheral and subset algorithms. Two of those are PoS and PoW. My understanding is that the two never occur simultaneously but every cryptocurrency uses either one or the other.

What Are PoS and PoW Used For?

PoS and PoW have to do, in varying degrees, with the security and speed issues of cryptocurrency. Specifically relating to the security issues, remember that one of the core unique benefits of the blockchain is that the transactions that take place within it are supposedly true and authentic.

How did they get that way?

Because they were verified.

How or by whom?

The transactions were verified by the other people or entities on the blockchain. In the case of PoW, that number of people is fewer because the coins are mined by a relatively small group of people.

In the case of PoS, that number is larger because PoS systems employ a more decentralized/dispersed mining and verification system. It’s more of a communal system while still maintaining the anonymity that cryptocurrency users usually like.

Both processes have been adequate up to now but the reason (as I understand it) that some well-known cryptocurrencies (Ethercoin) are switching from PoW to PoS is because the PoW is less democratic, more centralized (comparatively), much more resource intensive (read “expensive”), and more susceptible to corruption via what is known as a 51% atttack.

Note: In a 51% attack, a person or (more likely) a group of people (in this scenario…miners) taking over the system for their own nefarious purposes.

In a PoS system, the strength of it is not so much the fact that the people who mined the coins are doing the verification but the fact that the people who currently actually posses the coins mutually share the transaction verification process.

In both methods the objective is to ensure an authentic, fast transaction but many users and experts now seem to feel that a PoS system give not only quicker transaction verifications but also is less vulnerable to ‘takeovers’ by 51%’ers.

Note: My understanding is that a 51% attack is, up to the present time, only hypothetically possible. But when you consider the amount of money going into the cryptocurrency environment, you can’t blame decision makers for being cautious.

To state in another way, PoW is strong on trust because the validations come from the people who did/do the mining. PoW is strong on validation because the validations come from massive consensus.

This validation power, as you will see, is also sometimes referred to as “agreement”. But, as I understand it, it means the same thing in most contexts.

One soon-to-be-launched altcoin, MyCryptoCoin (MCC), will use a totally new, very versatile and robust eWallet based on the PoS algorithm. The MCC eWallet will be truly revolutionary because its speed will match current credit card processing times yet it will be far more functional with its interface with multiple payment systems and financial institutions–to include not only cryptocurrency but also fiat currency and institutions.

And… it will offer privacy features that current credit/debit cards do not.

Summary and Recommendation

In my neophyte opinion, the average cryptocurrency user would probably be wise to make sure that whatever cryptocurrency they use is based on a PoS algorithm. As I understand it, PoS systems have faster, safer, and more accurate transactions.

 

Art Williams
Freelance Copywriter
Case Studies and eMail Copywriting
Email me here

 

 

 

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