Proof-of-Work and Proof-of-Stake: what is it in simple terms?

 Proof-of-Work and Proof-of-Stake: what is it in simple terms? The key feature of this mathematical problem is asymmetry: it should be moderately difficult for the miner, but easy enough for the network as a whole. This is achieved through cryptography. Every miner in the network tries to solve the problem first; at the same time, it can actually be found only by direct enumeration, so many attempts are required for a successful solution. An example, perhaps a little fantastic, but illustrative. Imagine being handed a keyboard with several million numbered keys. You are looking for exactly the key that you need to complete the task correctly, but you do not know its number, so you sort through everything. There is a crowd around you, also looking for the right key. Suddenly you found the right key, tell everyone “guys, I found the key, its number is 22 875”. Everyone around starts checking key number 22875, and oh yes, it is. The one who finds the key first wins a prize. Each is th...

Disadvantages of PoS

Disadvantages of PoS


On the market, you can find a fairly large number of cryptocurrencies that work on a hybrid algorithm. Pure Proof-of-Stake is relatively rare, as there are several drawbacks.

One of the main ones is the unfair distribution of coins. The volume of the reward for an open block is determined by whoever has the most of a particular variety of cryptocurrency. This does not allow for complete decentralization. It is most profitable to own cryptocurrency in large volume, which leads to a monopoly of the market. Developers distribute the entire amount of money even before the moment when they enter the market. Early investors find themselves in the most favorable conditions, which does not attract new users. Large investors determine almost all development prospects.

There is a threat of an attack that will be provoked by the largest owners of coins. If the cryptocurrency is sold cheaply, then the coins can be bought in large quantities for a relatively small amount and gain control over most of the entire assets of the system. This allows attackers to resort to various manipulations.

Probability of parallel transactions. There may be two users in the system, the parameters of which will be the same. If the blocks are signed at the same time, both will be correct. Despite the existing shortcomings, the system still has prospects, as the creators are upgrading and working on bugs.