Disadvantages of Proof of Work and Proof of Stake, Explained

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Proof-of-work and proof-of-stake are arguably the most well-known consensus mechanisms — but new ones are popping up all the time.

PoW blockchains have long dominated the cryptocurrency landscape, with Bitcoin and Ethereum using this model. This means that miners are responsible for securing the network and validating transactions — and they are rewarded with new coins as a result.

However, a common criticism of proof of work concerns the amount of energy it uses and the impact of these blockchains on the environment. Miners must use large amounts of computing power to solve arbitrary mathematical equations. More advanced hardware was required as the industry matured, with electricity consumption also increasing.

This has led to proof-of-stake being seen as a more environmentally friendly approach. Miners are replaced by validators — nodes that have a financial stake in the proper functioning of the network. While proponents claim it can use 99% less power than PoW, some worry that PoS could lead to higher levels of centralization and censorship. Ethereum is currently transitioning to this consensus mechanism during The Merge — and it will be interesting to see how this high-stakes experiment unfolds.

A new approach is known as published proof of contribution, otherwise known as PPoC for short. Here, each participant has a role to play in ensuring that the ecosystem is decentralized, democratic, and well-governed.

 



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