Blockchain technology is built on the concept of consensus. There is a central authority in traditional digital payment systems like PayPal and Mastercard to ensure that the same money is not spent twice. However, in a distributed system like blockchain, autonomous nodes or computers in the network work together using a consensus method to eliminate double-spending and assure integrity and security.
Nodes in the blockchain network must agree on a single truth source in the same way. These tactics include Proof of Work (PoW), Proof of Stake (PoS), Proof of History (PoH), and other consensus procedures.
The oldest technique is Proof of Work, which was first established with Bitcoin and then adopted by Ethereum and other cryptocurrencies. The Proof of Stake consensus is used by Tezos and Cardona, whereas Solana employs both Proof of History and Proof of Stake. These processes, however, are linked.
Understanding Proof of Work will aid your understanding of various consensus mechanisms. The Proof of Work system, its flaws, and how Proof of Stake addresses these difficulties are discussed in this article.
Proof of Work Consensus Mechanism
The most often used consensus technique is Proof of Work. It was first offered in 1992 to protect a network against denial-of-service assaults and spam emails. Satoshi Nakamoto made this technique famous when he released the bitcoin white paper in 2008. Since then, the PoW has aided in the development of stable blockchains, such as Bitcoin and Ethereum.
A blockchain is made up of many layers of transactions that are connected together. Adding additional layers takes time and money, but it is necessary to make the blockchain safe. Energy, miners, and nodes are the major players in PoW.
Nodes are network machines that hold copies of the full blockchain and confirm network transactions. Miners are specialized nodes that compete to solve difficult mathematical or cryptographic challenges. The miner who solves it first adds the next block, which contains all of the current transactions.
Despite the fact that Ethereum still employs the Proof of Work process, it is scheduled to switch to Proof of Stake altogether by 2022. The Beacon Chain, Merge Chain, and Shard Chains were all meant to be completed in three stages.
The Beacon Chain, the first upgrade, was completed on December 1, 2020. It was the first time staking was introduced to the Ethereum network. Consider it a shard that operates alongside the main network.
The Altair update was released on October 27th, and it is the final improvement before the second phase, The Merge, is released. The main network and the Beacon Chain will be merged in the second phase. Ethereum Proof of Work will be phased off at this point, which is projected to happen in 2022.
Shard Chains, the final modification, will allow the network to be separated into 64 shards. Anyone with 32 Ether can be a validator using a mobile phone, computer, or other device at this point. As a result of the hardware independence, more nodes will be able to join the network, boosting decentralization.
There have been discussions on whether Bitcoin would eventually adopt the Proof of Stake protocol due to the technological obstacles involved in switching from PoW to PoS. If this occurs, it will be terrible news for cryptocurrency miners who have put a lot of time and money into the process.
Only time will tell whether or not that happens. Nevertheless, it is Ethereum that seems to be gaining an advantage here, and it is this cryptocurrency that is now more profitable to mine, for example thanks to plug & play operating systems such as simplemining.net.