PoS algorithm and others: description and advantages

The world's first cryptocurrency, Bitcoin, is powered by the Proof of Work consensus algorithm. It is this algorithm that secures the network and allows transactions to be confirmed.

The principle is simple: in order to generate a new block and confirm the transaction, the node must spend some computing power - to pick up the value of the hash function. The computer that does it first will be rewarded with some VTC.

This is roughly how mining works. As the demand for Bitcoin grows, the complexity of this process also increases: if before, a computer was enough for it, now the ASIC can hardly cope with it. This makes mining unprofitable, moreover, the huge power consumption harms the environment. However, we already have an alternative.

Proof of Ownership

A democratic solution to this problem is the so-called Proof of Stake algorithm or its close relative, Delegated Proof of Stake (DPoS), which is behind the EOS coin. The general idea behind PoS is that the nodes with the highest balance can confirm transactions. At the same time, DPoS allows participating computers to vote for the authentication rights of participants (nodes) in the secondary computer network, regardless of the number of coins.

Later blocks are jointly authenticated. The advantage of the technology is that while bitcoin can process 3-4 transactions per second, Ethereum can process around 20 transactions (compared to Visa which can process over 1500 transactions per second).

Even more energy efficient than the PoS and DPoS algorithms are the so-called Proof of Elapsed Time (PoET) consensus block chains: while all computers and nodes that authenticate transactions can be accurately identified, not all of them are involved in authenticating every money transfer. This technology was pioneered by Intel and is now mostly used in the financial sector.

The Hyperledger project, launched in 2015 by the Linux Foundation, IBM and SAP, is also based on this algorithm, so each blockchain can be linked together.

Proof of Authority (RoA).

The essence of the algorithm is that although all computers connected to the network participate in authentication, only a select few, that is, the so-called validator nodes, receive a reward, that is, coins for each transaction.

The point of selected validator nodes is that they can only be identified by people who themselves have been successfully validated. Usually the blockchain creator and operator, the field nodes and the computers of other network members can be controlled by anyone, although they have no direct interest in anything and can only say about themselves that they are members of the network and have all the transaction history data on their computers. This type of solution is typically used in private or centralized blockchains.

As more and more cryptocurrencies and more and more blockchains appear, the set of consensus algorithms grows. From the various hybrid versions and solutions listed in our article, to hard disk capacity solutions, new ideas emerge month after month, and their viability will be proven over time, as well as the popularity and exchange rate of cryptocurrencies based on them.

In the meantime, PoW and PoS are definitely the leaders in the market.
You can buy cryptocurrency based on these algorithms in our online exchanger.