In recent years, there is a rapid increase in cybercrime as hackers sought every possible means to weaken digital currency power.
However, digital currencies remain a highly secured online platform among other virtual technologies. The highest security points of cryptocurrencies are the mining systems. Miners work hard to implement a complex hash system that is difficult to dismantle.
As an investor, it is understandable to inquire about the security and stability of your digital asset. Bitcoin is rated one of the top cryptocurrencies in the world. How does it achieve this? It implements safety mechanisms such as proof of work and proof of stake.
These mechanisms have similar and different operations, which you would discover as you delve into this post. People have argued a lot about proof of work and proof of stake, while this post provides the necessary information you need.
Before moving on, you need a secured trading platform such as Bitvavo to trade your digital currencies.
Similarities Between Proof of Work and Proof of Stake
Both mechanisms serve their purpose to ensure transaction security. Also, they are both used to validate transactions without involving a third party.
Proof of Work and Proof of stacks are both adopted by popular cryptocurrencies in the market. Popular currencies such as Bitcoin and Ethereum use the POW mechanism, and other currencies like Dash and Neo have started operating on proof of stack mechanism.
Another similarity between proof of work and proof of stake is that they both use cryptography algorithms to carry out their operations.
Differences Between Proof of Work and Proof of Stake
If proof of work and proof of stake has so much power in detecting security threats, how do they achieve this?
Although POW and POS are both mechanisms for optimum security, they have different modes of operation. POW requires intensive electricity consumption, and it is limited in transactions number per second. Hence, the implementation of a proof of stack mechanism. Since proof of stack implementation, there is a reduction in long hours of transaction and electricity consumption. On Bitvavo, there are several cryptocurrencies that investors can trade.
Ethereum, as the second-largest cryptocurrency, can confirm transactions within sixteen seconds and faster than Bitcoin.
The first cryptocurrency to adopt the proof of work mechanism is Bitcoin. Bitcoin can carry out seven transactions in one second, and miners confirm transactions within ten minutes. Although different miners work to produce a hash network, it is difficult to tell which miners would successfully come up with one. Yes. Proof of work mechanism is that complex.
Many users argued proof of work sustainability as a medium for daily transactions due to its high transaction fee. This claim is correct, but it unjustified POW’s ability to ensure future security.
Whenever a person successfully verifies the authenticity of a transaction with proof of work, Bitcoin is given as a reward. Meanwhile, a lot of miners compete in the guessing game to discover the solvable combination. Research shows that miners with highly powered technological devices can predict the right combination faster.
Although both mechanisms use the same mathematical approach, the reward for each miner varies. Having explained that POW rewards successful miners that verify a specific block, POS rewards based on the number of coins at stake. In most cases, the winning miners in POS get the transaction fee as a reward. Here is how the proof of stack works.
For instance, a miner stakes $100, which is 10% of $1000. It means one has a 10% probability of receiving the transaction fee. That is, the higher the stake, the higher the reward probability. Meanwhile, miners have a minimum amount they can stake. Proof of stake also provides optimal security since miners’ coins are at stake. A miner who tries to cheat the mining system would lose all his stakes.
Knowing the similarities and differences between proof of work and proof of stake, you may wonder which mechanism is better? From research, a high percentage of miners assume proof of stake is a better option. This claim is attributed to the high payment miners receive from POS, which is more than the POW mechanism.
In conclusion, your payment channel is well secured, which is the most vital aspect to every investor.