No ‘Black and White’ Answer to the Proof-of-Work vs. Proof-of-Stake Question, Says Kraken

No ‘Black and White’ Answer to the Proof-of-Work vs. Proof-of-Stake Question, Says Kraken
Source: Adobe/Denis Rozhnovsky

The proof-of-work versus proof-of-stake face-off does not need to be a fight to the death, a new report has suggested – and a more nuanced approach could pay off for crypto players now fretting about which side of the fence they should be on.

The claims were made in a report on PoW and PoS from the crypto exchange Kraken’s Kraken Intelligence unit, which famous that each varieties of blockchain consensus mechanisms include appreciable advantages and drawbacks.

PoW is now utilized by Bitcoin (BTC), whereas Ethereum (ETH) plans to change to PoS this September.

The report’s authors famous that PoW and PoS are the crypto world’s two greatest Sybil resistance mechanisms. This means they defend blockchain networks towards potential Sybil assaults like spam nodes and 51% assaults – in addition to regulating the collection of block validators.

And the authors identified the significance of networks exhibiting Byzantine Fault Tolerance (BFT).

This latter idea comes from sport idea, referring to the incontrovertible fact that decentralized events can usually wrestle to obtain consensus with out the assist of a mutually trusted central social gathering. It refers to a state of affairs whereby a gaggle of Byzantine-era generals should conduct a joint assault on an enemy place from numerous separate positions – however can’t straight talk with one another throughout the course of.

This theoretical downside for the Byzantine generals, the authors remarked, “highlights a common problem among distributed networks” – particularly, “Can [the] independent participants of a distributed network form an agreement?”

BFT in PoS and PoW every contain “trade-offs” – and the “rivalry” between the two consensus mechanisms “confronts key questions of network security, sustainability, barriers to entry, and decentralization,” the Kraken Intelligence unit remarked.

The authors opined that PoW “generally offers better security and decentralization guarantees,” albeit at the price of “scalability.”

“Conversely, PoS typically offers better scalability in exchange for security and decentralization,” they wrote.

As such, the unit’s reply to the nice crypto query of our time – Is PoW or PoS higher? – is “it depends.” The “best choice” of mechanism “ultimately depends on a given blockchain’s use case,” the authors remarked.

PoW helps blockchains “retain the ethos of cryptoassets,” particularly decentralization and safety, they mentioned.

But for “use cases such as hard money,” they wrote, PoS is “likely less desirable” as these mechanisms permit for the “possibility of the wealthiest users gaining an overwhelming share” – which might compromise components like decentralization.

However, when it comes to “mediums of exchange” and sensible contracts, the authors opined that PoW is “potentially less desirable,” as a result of community effectivity and scalability are “paramount if these types of blockchains are to resist long-term scaling issues.”

In essence, the authors painted an image of a sliding scale with scalability at one finish and decentralization at the different – and a consensus mechanism to match at every finish. They defined:

“A highly scalable network is said to optimize scalability at the expense of decentralization and network security.”

The authors concluded that the selection between PoW and PoS was “not black and white” for blockchain networks.

Instead, they urged anybody considering of utilizing a blockchain community to develop a “nuanced understanding of the two and their trade-offs” to decide which possibility was “better suited” to their wants.
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