The proof-of-work blockchain consensus mechanism has gained a lot of traction due to its importance in Bitcoin management. However, the history of prisoners of war dates back to the early nineties when technologists used it to prevent denial of service attacks.
The reason is that Bitcoin has decided to explore this consensus based on the same motivation: to safeguard the network from attacks or fraudulent activities.
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How does POW work?
In the POW consensus, miners compete against each other to solve a mathematical puzzle. They have to solve it with evidence. The one who completes the puzzle first creates the next block in the chain and publishes it on the network. The other miners involved in the process transform the validators and check if the solution is correct. The miner who successfully solved the puzzle receives rewards in tokens.
As noted earlier, the idea of POW was first published by Cynthia Dwork and Moni Naor in 1993. Subsequently, Satoshi Nakamoto brought it to the blockchain scene with the introduction of blockchain in 2008.
Mining work requires computers and energy to perform them. There are several advantages to the POW system, which is why several coins, in addition to Bitcoin, such as Litecoin and Ethereum 1.0, take advantage of it.
The advantages of prisoners of war
The vital advantage of POW is that it is safe.
Proof-of-Work requires a miner to engage in hashing functions randomly. The process continues until you get to the correct output. It requires hiring over 51% of the hashing power for a hacker to disrupt the network. Reaching 51% requires a huge amount of computing power.
Generating this energy entails an immensely high financial cost that goes into purchasing hardware and paying for electricity. It is not at all incentive for a hacker to make this effort since the amount the hacker spends could exceed the profits he would make from hacking or spamming. If a significant number of nodes are mined, the computing power needed to overwhelm the network becomes virtually unattainable for the spammer.
In fact, POW provides security to an entire network. But there are also several drawbacks of the process.
The downsides of proof-of-work
Bitcoin mining is energy intensive and, therefore, is not recommendable for the environment.
According to one study, Bitcoin mining consumes more than 120 terawatt hours of energy each year, and miners often use electricity produced from fossil fuels. In addition to discouraging a potential attacker, there is no other penalty for a malicious miner. If a miner manages to take over 51% of the hashing power, there is no other checkpoint to prevent him from dictating the network. In POW, each node must process each transaction. Therefore, the process becomes time-consuming and difficult to scale.
The intent to combat these drawbacks has introduced other blockchain consensus mechanisms with proof-of-stake which is the most popular and well accepted among them.
What is Proof-of-Stake?
The concept of Proof-of-Stake (POS) consensus has emerged as an alternative to POW.
In POS, a person can validate block transactions based on the number of tokens held. Owning more tokens implies more validation power. In Proof-of-Stake, a validator must point or block a certain number of tokens native to that network.
Once pointed, the network randomly chooses one of these validators to create blocks and confirm those that others have created. The network also uses these coins to incentivize participants. For example, the network can take away a part of the participant’s holdings, penalizing the bad behavior of the network. Incorrect network behavior could be offline, intentional collusion, or failure to validate. Validators could end up losing all their holdings.
Benefits of POS
Since blockchain experts have conceived of POS as a cure for POW flaws, POS has many advantages.
For example, you don’t need much energy to extract blocks. It lowers the barrier of entry as the hardware and electricity requirement is much lower. It is more inclusive and allows more nodes in the network, essentially reinforcing the central concept of decentralization.
In addition, everyone who takes part in the validation process can potentially earn rewards (usually in the form of an annual percentage return in the token they are wagering).
POS also allows for horizontal partitioning where you can distribute network load across many chains. In turn, it makes the network more scalable and easy to grow. But, like any other system, process, or protocol, the POS also suffers from drawbacks.
Negative aspects of the betting test
POS is vulnerable to a wide range of potential attacks to which POW is immune.
A low-cost bribe attack is one such attack in which an attacker executes a transaction that they originally intended to cancel. After conducting the transaction, the attacker waits for it to reach an agreement. Once settled, the attacker forks the blockchain and continues to build on it until it becomes longer than the original. Next, the attacker publishes the blockchain as a whole. Performing such a POS attack, estimated, costs 50 times less than what POW requires.
In addition to this type of attack, POS is also vulnerable to service attacks, Sybil attacks, and denial of service attacks.
Will Bitcoin ever adopt POS?
Many crypto experts, such as Bitcoin Suisse founder Niklas Nikolajsen, believe that Bitcoin will eventually follow the path of ETH 2.0 and move to POS.
Much of this assumption stemmed from the sustainable energy use issues that hovered around Bitcoin mining. But POW, as a concept, has stood the test of time as it dates back to the time before Bitcoin appeared on the market. Many believe that Bitcoin’s move to POS consensus will not happen as it would be technically challenging and discouraging for those who have already invested a lot of effort and resources into it.
