In this blog post, we will go over the key differences between the Proof of Work and Proof of Stake consensum mechanisms.

PoW vs PoS⌗

Proof of Work (PoW) and Proof of Stake (PoS) are both designed to ensure the security and integrity of blockchain networks, but they approach it in different ways. PoW uses computational power to solve mathematical problems and validate transactions, while PoS uses staked cryptocurrency as collateral to select validators.

One of the reasons why PoW is considered to be more secure than PoS is that it requires a significant amount of computational power to solve the mathematical problems, which makes it difficult for attackers to manipulate the blockchain. In a PoW system, a miner needs to control over 50% of the network’s computational power to launch a 51% attack, which is a situation where an attacker gains control of the majority of the network’s computing power and can manipulate the blockchain’s transactions. This is a very difficult and costly task, which makes PoW networks highly resistant to attacks.

On the other hand, PoS is based on the idea that validators will act in the best interests of the network because they have staked their cryptocurrency as collateral. However, if a validator acts maliciously, they can lose their stake, but this alone may not be enough to deter all attackers. If an attacker gains control of the majority of the cryptocurrency staked in the network, they can manipulate transactions and potentially launch an attack.

In summary, PoW is considered more secure than PoS because it requires a significant amount of computational power to attack the network, which makes it very difficult and costly for attackers to manipulate the blockchain. However, it’s important to note that both consensus mechanisms have their strengths and weaknesses, and the choice of which one to use depends on the specific needs and goals of a blockchain network.

Why PoS is Insecure⌗

In 2016, the Ethereum network suffered a major hack that exploited a vulnerability in the DAO (Decentralized Autonomous Organization) smart contract, resulting in the loss of millions of dollars worth of ether (ETH). To rectify the situation and recover the lost funds, the Ethereum community proposed a hard fork, which is essentially a change to the protocol that requires all nodes to upgrade to the new version of the software.

The hard fork was controversial because it involved rolling back the blockchain to a previous state before the hack occurred, which goes against the fundamental principle of immutability in blockchain. However, the majority of the community supported the hard fork, and the new version of Ethereum, known as Ethereum Classic (ETC), was created as a result.

The reason why the hard fork failed to rectify the situation and resulted in the creation of a new chain is because it was a PoS-based consensus mechanism. At the time, Ethereum was in the process of transitioning from PoW to PoS, and the hard fork was based on the PoS protocol. However, there were issues with the implementation of the PoS protocol, which allowed attackers to manipulate the blockchain and create fake ETH tokens. This led to a split in the Ethereum community and the creation of Ethereum Classic as a separate chain that continued to use the original PoW consensus mechanism.

This example highlights the risks of using PoS in certain scenarios, as it relies on validators holding a stake in the network to act in the best interests of the network. However, if the implementation of the PoS protocol is flawed or vulnerable to attacks, it can lead to serious consequences such as chain splits, network instability, and loss of user confidence.

In contrast, PoW has a proven track record of security and resistance to attacks, which makes it a more reliable and secure consensus mechanism.