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CONSENSUS MECHANISMS - PoW vs PoS
Hey, Alkalites! If you want to invest in cryptocurrencies and know how to recognize long-term opportunities, you should start learning the technology behind them.
Do you know what a consensus mechanism is?
Consensus decision-making is a process in which group members agree to support a decision in the best interest of the whole.
In other words, this mechanism is used to govern the blockchain behind each asset. Usually, this consensus is necessary to confirm the validity of the transactions that take place in that network.
The most common consensus mechanisms are PoW (Proof of Work) and PoS (Proof of Stake).
PoW is used to determine how the network can be sure that the transaction is valid and that someone is not corrupting the network, for example, with double-spending. The Proof of Work is based on advanced mathematical formulas called “cryptography”. That is why the name "cryptocurrency" was invented.
All miners compete looking for a solution to the mathematical problem. The first miner (or pool of miners) to solve the block problem receives a reward, the block is created and transactions are included. Examples are BTC and ETH.
PoS uses a process by which contributors to the system earn commissions from transactions. To validate the transactions, the user must put their coins in a wallet that freezes the coins. The more you stake, the more you earn.
If someone tried to hack the network or process malicious transactions, he would lose all of his participation, since it would affect the integrity of his wallet. Also, it encourages holding the tokens, which is good for the value. Examples are Algorand and Cardano.
Do you have any question? Let me know!
Have a great Sunday, Alkalites!
Do you know what a consensus mechanism is?
Consensus decision-making is a process in which group members agree to support a decision in the best interest of the whole.
In other words, this mechanism is used to govern the blockchain behind each asset. Usually, this consensus is necessary to confirm the validity of the transactions that take place in that network.
The most common consensus mechanisms are PoW (Proof of Work) and PoS (Proof of Stake).
PoW is used to determine how the network can be sure that the transaction is valid and that someone is not corrupting the network, for example, with double-spending. The Proof of Work is based on advanced mathematical formulas called “cryptography”. That is why the name "cryptocurrency" was invented.
All miners compete looking for a solution to the mathematical problem. The first miner (or pool of miners) to solve the block problem receives a reward, the block is created and transactions are included. Examples are BTC and ETH.
PoS uses a process by which contributors to the system earn commissions from transactions. To validate the transactions, the user must put their coins in a wallet that freezes the coins. The more you stake, the more you earn.
If someone tried to hack the network or process malicious transactions, he would lose all of his participation, since it would affect the integrity of his wallet. Also, it encourages holding the tokens, which is good for the value. Examples are Algorand and Cardano.
Do you have any question? Let me know!
Have a great Sunday, Alkalites!
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