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!
This publication has been selected for Editor's Picks. Thanks for your valuable contribution to the community! Keep up the good work! 👍🏽
kickflip360
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You forgot, Low energy input = less security and value. And PoS mining can definately be centralised to those with the largest stake. I would argue even more so than PoW.
CosmicInterloper
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@kickflip360, Proof of Stake suffers from more cartelization than Proof of Work simply by virtue of it being easier to collude than compete.
jeremiahjones
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@kickflip360, thank god this is one of the top comments here. I hate this wrong narrative that proof of stake is better than proof of work. Neither protocol is better, they are different and have different advantages. There will be a place for both in the future and the projects that want to survive long term will have to be part of networks that offer multichain partnerships for both protocols. Just look at the cross-chain interoperability between Cardano (PoS) and Ergo (PoW). If crypto ever wants to be mass adopted we need security and convenience, currently there is always a trade off.
r4nd0mwilso236
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POS = Whoever has the most coins makes the most money
POW = Whoever invests the most in miners AND has the lowest energy usage makes the most money
Don't see how POS is more decentralized with the pre-mines, early adapters, and crooked crap that most of these POS coins engage in. I agree many of the POW are the same, but the economics are much better. Having the node validators, miners, and token holders separate is more decentralized than if you hold coins basically you are a miner.
kingtut101
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PoS is fiat crypto. Those with the most crypto have the most control. Every PoS crypto, just like fiat, will go to zero. They will all fall victim to 51% attacks. Also, most PoS coins are pre-mined, then sold to the public.
Ethereum and it's competitors will only create a new generation of robber barrons and central banks who pre-mine coins. I don't want to trade my valuable labor for worthless digital fiat.
PoW solves this problem. And yes, electrical costs are high. If there wasn't high electrical costs, it would be worthless. A nation's economy derives it's value from the goods and services it produces. On a basic level, value is derived from the energy and labor put into the economy. PoW derives it's value from the energy used to create it.
In a sane world, PoS will never succeed, and PoW will save humanity from financial terrorism enacted by world governments and central banks.
scottreefer
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They really need a thumbs down button. This is probably not one of the smartest compilations of an option on pos that I’ve ever heard. I’m a miner and even I understand that btc is the only pow that will survive.