Proof of work or Proof of stake?

The emergence of crypto into the mainstream brings a variety of complex terms that might be bewildering to a lot of people. Understanding these terms may take a lot of research, where the correct information may not be conveyed in an easy to digest manner.

Proof of stake is a consensus mechanism that Cardano (ADA) uses to validate blocks in the network. Users or delegates, pool their ADA and are then allowed to delegate their ADA to a particular stake pool of their choice. In essence, the more ADA that is delegated to a particular pool the more trust that pool has to validate blocks in that network.

On the other hand, we have proof of work. Proof of work uses computing power to validate and mine blocks. More processing power correlates with the number of blocks you can produce. However, the PoW algorithm can be detrimental to the environment, due to the amount of electricity that is consumed to be able to produce and validate these blocks.

With Cardano’s Ouroboros protocol your mining power depends on the number of coins that a specific validator decides to stake. Essentially the more coins that you stake raises your chance to be chosen as a validator to add new blocks within the network. Many proof of stake protocols tends to work differently. Usually, there is an element of randomisation when choosing validators, alongside the amount of time a delegator has staked their coins for. Rewards are often granted through staking your coins to a preferred stake pool, in the form of additional tokens.

From an environmental standpoint, PoS tends to work better when we look at both consensus mechanisms. Looking into the future it seems inconceivable for the PoW algorithm to be able to be used from a global standpoint moving forwards.

As Cardano’s PoS mechanism grows it aims to solve many problems within the blockchain community. Proof of stake was designed to solve, scalability, interoperability and sustainability problems within the blockchain ecosystem. This means that there should be a significant reduction in energy consumption since miners no longer need to rely on a vast amount of energy consumption to compete in the validation of blocks.

It would be sceptical to try and foresee how crypto continues to evolve going forwards. Each mechanism has its pros and cons. However, some things are evident. From an environmental standpoint and for the continuous global adoption of crypto a mechanism that is sustainable and scalable needs to be solidified. From our standpoint, all obvious solutions point in the direction of PoS. The Cardano team seem to be working rigorously to ensure that their Ouroboros protocol continues to be beneficial for everybody.

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