Proof of What?
What are Consensus Mechanisms?
The purpose of a Consensus Mechanism is to create a process for decision making within a Blockchain network. It is an algorithm embedded into the foundation of the Blockchain to maintain operational security, allowing only genuine users to add valid transactions to the history.
Today, there are two common Consensus Mechanisms that lead in the Blockchain and Crypto space. They are Proof of Work (PoW) and Proof of Stake (PoS). They differ in the method by which they prioritize who can add authorized transactions to the chain.
PoW: Miners compete against each other using specialized computers and hardware to be the first to solve a complex puzzle. The winning miner has the opportunity to validate the transaction.
PoS: Validators need to lock up and “stake” a certain amount of the currency and for a minimum amount of time as collateral, before they can be awarded the opportunity to validate transactions.
PoW is the original Consensus Mechanism in Crypto, while PoS was created by newer Blockchain’s in an attempt to improve on the “pitfalls'' of Bitcoin’s Consensus Mechanism. However, both methods have their trade offs and we can learn more about them below:
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