Thread by @laishawadhwa

Gm Gm buidlers and web3 enthu cutlets!

Its Day 16 of #web3glossary 🚀

P: PoW | PoS

In such a dynamically changing status of the blockchain, we need an efficient,fair, real-time & secure mechanism to ensure that all the txns on the network are genuine and all participants agree on a consensus on the status of the ledger

Consensus mechanism does that job for us

It’s a set of rules that decides on the legitimacy of contributions made by the various participants of the blockchain.

There are 2 kinds of consensus mechanisms
PoW: Proof of Work
PoS: Proof of Stake

PoW requires a participant node to prove that the work done and submitted by them, qualifies them to receive the right to add new transactions to the blockchain. It ensures the integrity of new data as it requires members of network to expend effort in solving an arbitrary..

..mathematical puzzle to prevent anybody from gaming the system.
@Bitcoin and @litecoin use PoW

However, this computation leads to high energy consumption and a longer processing time.🧐

But, where there’s a problem, there’s a solution💯

PoS evolved as a low-cost & low-energy consuming alternative to the PoW model
It delegates control of the network to owners of the token
It allocates responsibility of maintaining the public ledger to participant node in proportion to the no of virtual currency tokens held by it

Let’s scratch the surface🧐
In the PoS model, stakers (same as miners in PoW) lock up funds in a special smart contract. Every time a new block is needed by the network, an algorithm grants a specific staker the opportunity to publish the next block.
👇👇

The algorithm selects the staker via lottery, depending on each staker’s percentage of total staked funds.

For e.g., if a single staker controls 25% of all funds staked on a given network, they have a 25% chance of mining the next block.

Do you see a problem here?🧐

PoS has a stronger tendency to centralize and concentrate token ownership to large holders & hence its security guarantees are weaker than PoW.

PoS model has governance problems and is more vulnerability to attacks

Let me break it down with another eg
Say we have a PoS network.

..worth $50 bn where 10% of tokens are staked. The $100 bn network can be taken over by any party that is able to allocate $5 bn
All the attacker would have to do is send $5 bn in tokens to a staking contract. While the same would be fairly difficult for PoW models.
Why?

Coz it would require purchasing ASICs, acquiring space and energy contracts to mine at a scale larger than the entire network and if such an attack were underway entire network would likely be made aware beforehand by the immense demand for ASICs and electricity.

So, both PoS and PoW their fair share of pros and cons, we do have other consensus mechanisms like PoH (by @solana ), PoC, PoA, PoB.
Let me know if you’d like to know more about these👀🚀

Thats a wrap for Day 16!

I’ll be sharing information on the new vocabulary of the web for next 30 days.🚀

It’s like a free crash course on the terms and methodolgies in Web3.

📌Follow me @laishawadhwa for more such web3 gyaan!

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