What is Proof-of-Work?
Proof of work is a consensus algorithm that is used to protect against fraud and denial-of-service attacks by requiring proof of expendable resources in exchange for a chance at being rewarded tokens. In order to compensate participants for the effort spent in mining (solving with proof-of-work), blockchains use either an inflationary or deflationary token model.
Proof of Work consensus algorithm is used in cryptocurrencies like Bitcoin, Ethereum, and Litecoin.
What is Proof-of-Stake?
Proof of stake allows miners to invest in finding blocks instead of solving computationally difficult problems. Staking, or locking up tokens for a period of time (for example, three days) allows them to sign, validate, and to mine blocks on the network. Coins that are staked generate interest at regular intervals depending on how long they were staked for.
It is an alternative to Proof-of-Work which requires less energy and no mining equipment.
Proof-of-Stake is a consensus algorithm that requires nodes to prove ownership of a certain amount of currency, in return for the right to verify transactions and create new blocks. In contrast with Proof-of-Work, which demands truth by way of burning real or virtual resources, PoS protocols do not require mining equipment and therefore don’t incur any real cost to participating in the network.
Because of this, PoS is also often seen as a more environmentally friendly option than Proof-of-Work, requiring less energy and higher transaction throughput at very low costs. The only drawback of PoS protocols is that not all nodes are eligible for block creation, therefore they are often dubbed as semi-decentralized.
Notable examples of PoS cryptocurrencies you can find on platforms like Bitcoin Evolution are Peercoin, NXT, BlackCoin, NEM, and BitShares.
What is Proof of Authority?
Proof of authority is an algorithm that does not rely on a cryptographic proof for consensus but instead, it uses the reputation of each validator. It works by permitting nodes that have an authority score of over a certain threshold to create new blocks and validate transactions for the network.
The consensus protocol is based on whitelists, where each validator “signs” off on transactions depending on whether or not they’re on the whitelist. With PoA protocols, anyone who is not on the whitelist can be ignored by the network.
Proof of Authority is a consensus protocol used in private blockchains and consortium chains. It is designed to maintain a designated node list, which provides an easy way for blockchain administrators to adjust the network configuration centrally without requiring any distributed consensus algorithm.
The concept of Proof-of-Authority is mainly used by consortium blockchains where the consensus process does not require efforts from all participants in the network. Instead, it uses a node that has implemented some kind of identity solution. All nodes that are a part of a network’s consortium are required to sign off on every transaction.
Such protocols don’t involve any computationally expensive mathematical problems and mainly require a certain level of trust among all participants in the network.
Closing Remarks
Proof of authority allows you to save resources since mining is not required. Thus, it’s considered to be a cost-effective solution for private blockchains which require faster transactions and operate within a closed network.
