The author of this article by Cobo stakingrewards.com, the original compiler
In this paper, a total of 7268 words, is expected to 18 minutes of reading time
In order to understand the Staking and PoS (proof of interest), we will put it with the most mainstream consensus mechanism — PoW (proof of work) were compared.
Most of the current public chain are used in PoW PoS, but with the growing concern, can be expected in the near future, the proportion of PoS will exceed PoW.
Now almost all new public chain is based on the PoS, even the second public square will also be in the etheric chain under a major upgrade to PoS. Why is this? PoS is really better than PoW?
PoS indeed in some respects better than PoW, in the following we will from the two dimensions of comparative analysis of several.
Definition of PoS
First, let us explain the basic concept.
| PoW and PoS are two different algorithms, which determine the distributed network consensus, and how to maintain consensus reward.
In other words, PoW and PoS, expounds how to issue new currency to provide incentives for the network, and reward those who provide resources to maintain consensus. Behind these currency value have resources (mills, ASIC chip or a certain amount of money etc.), but the premise is that you must pay to get the reward of honest action. Whether it is BTC or ETH, or XTZ, are such.
You may say: in the network or to lock certain resources, also bear certain risks, it sounds like Staking. Yes, indeed!
In fact, PoW can use PoS logic to understand, to spend money to buy its equipment and power is a form equivalent to Staking. We can further conclude that Staking is a traditional form of economic capital to obtain the return.
In spite of this understanding in some cases is not wrong, but we still go back to the two definition and their core difference.
The security of PoW network from the hash function, the theory was greater the higher the income, the specific reference to bitcoin miners and mine pool.
The security of PoS from mortgage economic value theory, Staking the higher the number of higher income. (the “theory”, because the choice of Validator is random, so you can avoid the center.)
Although each consensus protocols are not the same, but there are some basic principles for us to compare.
Next, we will go through the development trend, scalability, network security, to the center, cost, governance, community participation, environmental protection aspects of the cold start, PoW and PoS were compared.
Two, development trend
Although PoS than PoW’s short history and share in the overall market is small, but it is developing rapidly.
In fact, there are thirteen have used PoS or PoS thirty encryption currency at market value, including EOS, Stellar, Tron, Dash, Neo, Binance, Chain, Ontology, Tezos, NEM, VeChain, Waves, Qtum, Decred, Lisk, and three (ETH, Cardano and OmiseGO) are turning to PoS.
This also means that the market before the thirty currencies in more than half in the use of PoS. In addition, the second layer of almost all of the solutions in the use of Staking mechanism. He even bitcoin lightning network can also be considered a form of PoS: some relay nodes to bitcoin stake, help users to trade through the channel, and earn some fees.
The total market value of $160 billion: > Staking
The total value of Staking lock: > $5 billion.
PoS market capitalization accounted for: 9.80%
In addition to BTC and ETH, PoS market capitalization accounted for: 26.6%
(source: Stakingrewards.com 29.04.2019)
These figures are still growing, but many people expect the total value of PoS chain will reach $50 billion by the end of this year. With Binance Chain, Cosmos and Polkadot will be transferred to the PoS block chain project agreement, and the launch of ETH 2, the total value of PoS chain is likely to exceed this size.
Proof of interest (PoS) appears to be slowly occupy the entire market.
Talk about scalability, must take into account the transaction throughput and transaction confirmation time.
Transaction throughput: block time and block size limits the throughput of the network transaction. The mechanism of PoW bitcoin block time is about ten minutes, other currencies short, Ethernet square can be reduced to fifteen seconds, the transaction throughput will reduce with the corresponding block time increased slightly.
In the PoS consensus defenders (such as Validator, block producer) to work together, because a short time a lot, the average transaction throughput is much higher than PoW.
For example, Tezos has been able to achieve 40 transactions per second (40 TPS). DPoS (principal interests proof) in EOS, TRON even can handle more than 1000 TPS transactions.
The transaction confirmation transaction confirmation time: time is the blockchain scalability measure an important factor, especially in a business environment. In the PoS consensus mechanism, transactions faster, even in certain scenarios almost in real time to confirm.
Four, network security
As everyone knows, as early as 2009 bitcoin as the pioneers of the PoW had started, and stable operation for more than 10 years, a lot of other digital currency was also adopted the PoW consensus mechanism. In ten years, PoW has become a common chain design template, after repeated attacks, reliability and safety tested.
In the short term PoW may be affected by the threat of monopoly mining, through the purchase of external equipment to improve the work force, launched 51% attacks. But for bitcoin, buy hash is force to achieve such attacks is almost impossible, but for some small scale chain like Verge, PoW, ETC is feasible.
If you want to estimate the bitcoin 51% implementation cost of attack, we must first consider the cost of hardware and power.
Total hash hashrate: 50000000 TH/s
Current price: $300 S9 ant mills
The ant machine S9 hash hashrate: 13 TH/s
51% attacks: $1153846153 USD (hardware costs accounted for about 1.11% of the value of the network)
PoS and Staking are still fresh things, like PeerCoin Ardor, although these coins have been around for a long time, but the first mainstream PoS chain Tezos until the summer of 2018 was on the line.
PoS money has not yet done rigorous stress tests, so we do not know what the problem is likely to face.
The following is a list of some PoS may face attack:
Long range attack Long Range Attack
Long range attack is that the attacker creates a start from the block long chain branching block, and tried to replace the current legal backbone. The branch may have different trading and main chain and block, so this kind of attack is also known as the replacement attack or overwrite attack history history.
Nothing at Stake Attack disinterestness attack
There is no interest PoS network attack. Unlike PoW, PoS operation of a number of chain cost is very low, can Validator to a plurality of chain voting without any loss, this would violate consensus agreement.
51% attack 51% Attack
You may think that launched 51% attacks need to hold a total amount of 51% dollars, but in some of the PoS network, only need to at least 33% of the stake funds will be able to launch such an attack.
But if we can absorb others to vote, the attacker doesn’t even need to use their own money to attack, they can even through purchase or bribery to obtain the vote.
Another point is that the 33% I’m not the PoS money supply in 33%, but Staking capital pool 33%. This is so, there will be less amount of money needed to attack launched 51%.
Staking Low Staking Participation low participation rate
As mentioned above, some in the PoS network, quantity of money can only pledge to active in the pool of funds in 33% to launch a 51% attack. For example, the stake rate of 25%, 33%* 25%=1/12, is an attack only needs the PoS money supply 1/12.
Private Key Attack private key attack
The private key network once acquired, people will attack Staking obtain ownership of the funds and signed the transaction right. Even if the private key does not directly control all Staking funds, obtained private access to Validation and Staking power, easy to attack.
So, PoS network is a big security risk exists in the value network (stake) transfer to Validator during this period may lead to high centrality and network attack. As long as have a lot of resources, it is possible to buy votes monopolies or Validator to initiate an attack.
LISK is in a similar situation, Validator established several organizations to manipulate share incentive. EOS Validator has developed the EOS constitution, provisions of voters can not receive any reward.
Please pay attention to the above mentioned several attacks, PoS may have the prevention against these attacks at the beginning of the design, but the PoS still hasn’t experienced the test of actual pressure.
Hybrid consensus mechanism like Elastos have begun to appear, for security reasons, it is used in bitcoin mining as the parent chain, and has a similar EOS DPoS consensus algorithm. This hybrid consensus mechanism are also worth exploring.
Five, to the center
PoW mining relies on machine equipment, these devices have a higher threshold, and technology companies.
Mining is a difficult project, because the purchase of ASIC chip is long-term investment funds that, unlike PoS with liquidity.
And now the mining profit is very low, only those large enterprises have hardware technology and cheap electricity can be profitable.
Unlike PoW, PoS is the core consensus mechanism in the network can exchange these coins, coins in the OTC market and even buy in bulk, do not need to get involved in Staking mining, so almost no threshold. In the PoS consensus mechanism, super node through the operation and maintenance of the network to get rewards, so the operation node motivation is very high.
Although not all people are willing or able to run the node, but the mechanism is very important for Staking to the center, because PoS allows all cash in case of not running nodes and participate in the voting agreement.
But you will not believe in the PoS consensus mechanism under the rich get richer? Compared with PoW, in fact. In the PoW consensus mechanism, “the rich richer” rule is more obvious, money can buy a lot of ore miners ASIC, they have the resources and enjoy high returns. PoW big miners enjoy economies of scale of return; but for PoS Staker, only linear return.
(source: 3IQ research group)
Six, the cost of
Discuss the cost, we have to consider three aspects:
Cost chain Trading
The need to maintain the blockchain cost of capital
The miners needed Validator or compensation inflation cost
Cost chain Trading
In the chain store data is extremely expensive, each byte to be transmitted to each node in the network block chain, and these nodes are stored.
In the PoW agreement, bitcoin transaction cost about $1.91 each, the transaction cost of Ethernet workshop is about $0.1 each, the transaction cost with the currency price changes. When the bull market highs, bitcoin transaction costs and etheric Fang respectively can be as high as $54.9 and $5.5.
In the PoS consensus, the transaction cost is much lower. Take Tezos for example, the transaction costs only about $0.01, the other is almost like Cosmos PoS coins.
Now, let us look at the need to maintain the blockchain cost.
Need to maintain a block chain cost
PoW requires expensive hardware and electricity costs, while in PoS, a Validator will only need a safe & sound operation of the equipment, and the cost of electricity can be a little.
In the bitcoin network, the annual required hardware maintenance cost is about $2 billion (these hardware life is about 18 months), electricity costs about $4 billion ($0.08 per kilowatt power according to count).
That is to say, to the normal operation of the PoW network, need to invest a total value of 6.5% network. In PoS network, the maintenance costs accounted for only 0.1% of the total value of the network.
The cost of inflation
In the PoS network, the inflation rate is about 6%, while the PoW network, the ratio is about 4% (only estimates).
The design of incentive chain block will advance over time and reduce inflation, PoW are longer than PoS, so we can say that the two level of inflation is almost the same, the future inflation rate of PoS will become more and more low.
In the PoW network, those are not miners investors do not have a good way to resist inflation, while in the PoS network, Chibidaigou can students gain some income currency coins.
In the PoW network, the protocol can be divided into several party governance:
The miners decided: transaction information is confirmed and the dig which strand
User: decide which one to accept the agreement, and the use of which ecological
Foundation: decide how to allocate funds in different development organizations
Node: which decided to run the software and provide services to users through API
In the PoW network, it is hard to say who holds the largest vote, because the PoW vote is difficult to quantify. However, in order to maintain the network and manage the huge resources and network, there is a consensus between the parties still need. The lack of transparency in PoW network management protocol and the upgrade process is slow.
Several groups of PoS governance is also distributed in the above mentioned, but the governance mechanism is more systematic, we can follow a simple rule: 1:1 vote.
Moreover, in the PoS network, we can implement the management chain (in fact, the PoW network can be realized, but there is no attempt). The chain management allows us to create an agreement or put forward the suggestions to improve the agreement, can also vote on a chain. Based on the results of the vote on the chain, the agreement can be executed automatically. This chain is currently using the governance mechanism on Tezos.
Other examples are PoS governance to vote:
Vote design clear PoS governance to change protocol can be implemented rapidly.
Eight, community participation
PoW miners have traditional commercial thinking, they are more willing to invest in a familiar traditional business model. For them, similar to the Mining Manufacturing factory. Mining equipment is more advanced production equipment and technology, the higher the efficiency. Cheap power is the necessary resources for mining industry, the business model for dependence on market prices and traditional factories depend on a reasonable price of steel.
Which of course is risky: if digital currency prices, may become unprofitable. But in most cases, the market price to sell all the coins also can earn money.
Most of today’s miners are mining equipment and electricity have certain resources, they have little incentive to participate in community. If they really believe that the value of currency, direct investment can be rewarding. Direct investment returns have exceeded now bitcoin mining, we think the long-term trend will not change.
In contrast, PoS Validator is more like investors, they need to have a deep understanding of the digital currency behind the development of technology, at the same time make a contribution agreement. Large PoS currencies generally have independent research team.
In order to get more votes, these Validator generally need to hold a lot of money. Provide service by Staking or Staking, these funds will be locked for a certain period of time, if you want to use some of the funds, they may not be able to continue to provide services for all customers.
This Validator has become a long-term investors, they are more dynamic driving technology and value. The incentive is higher, more investment.
This is like the early stages of the venture capital, VC investment company to provide support for them. This metaphor summed up the image mining investment theory, the use of the Coinfund after the spread.
Nine, cold start
What is the issue of a chain of public the best way? In view of play in the public and the tokens to chain the role of financing, we must consider the public through what way tokens.
The issuance of a PoW chain is very simple. The initial issuance of PoW is 0, everyone get through equal participation. This process seems relatively simple, equal and transparent.
In order to provide support for continued research and development agreement, also can be like Zcash to set up a development fund, a small part of the block awards granted directly to developers.
Cold start PoS network (Bootstrapping) is more complex, from the beginning, you need to hold a part of multi interests, the proportion of ICO was decided on the issue before.
The most common method is to issue tokens (ICO or IEO or, or other forms), the original supply tokens sold or issued to investors, developers, Fund Council, etc..
Because the threshold is involved in the original equity allocation of large investors access to high, also can get rich rewards, this token issue general unfair, there is more community for the ordinary investors limited.
The token awarded usually opaque, and often change. This also means that the interests of investors may be diluted, but is still in the dark.
Another method of issuing tokens is dropped, people do not need to direct investment can receive a certain number of tokens. This token drop usually occurs in the receiver is not informed, and the number of extremely small, almost negligible compared to the total. Because of the lack of transparency, this does not seem to be the best way.
In addition, there are some other cold start, but still in the early stage, it is difficult to conclude. One is the introduction of Cosmos is similar to the “cross chain drop” concept, it is through the hard partition (hard spoon) – by copying a PoW or PoS in the chain of digital currency account balances to a new PoS chain, a new digital currency on this chain has interoperability, and can be do Staking.
Hard Spoon: an existing block chain network to form a new chain based on the new and original; not chain chain competition, but to provide wider access.” Tendermint founder Jae KwonJae Kwon
Ten, environmental protection
If we look at the protection of a public chain cost, PoW much more than the PoS, after all, the high cost of equipment and power. From this point of view, PoW is clearly not friendly to the environment.
Nevertheless, we believe it is not worth mentioning the power consumption and we are compared to the value. We have a distrust, globalization, can not be tampered with, high security books. Compared with the gold mining, and the consumption of the existing financial system cost, the cost of PoW is not so high. If you look at the impact on the environment, we recognize that PoS is better, because it is more environmentally friendly.
In this paper, we compared the PoW and PoS from several dimensions. The two are not perfect, the future will not be a consensus on the mechanism of the unity of the situation.
We strongly believe that eventually there is at least one PoW chain will exist, it is likely that bitcoin. The PoW chain provides security and There is nothing comparable to this Irrevocable, but also as a global settlement layer and a source of real data. Around bitcoin, people placed a lot of vision, but also controversial.
More and more new blockchain protocol using PoS security model, and with the Ethernet gradually transferred from PoW to PoS square, PoS proportion will increase significantly.
Most of the layer 2 solutions using PoS, Staking drive to become hot topic in the blockchain world.
If we look like Cosmos and Polkadot the interaction and application of PoS chain, we will find that even PoS and some like coins, coins, coin such large Munro PoW chain link. The PoW chain need to have its own division (Zone), parallel chain (Parachains) and Bridge (Bridges) or their Unicom, indirectly to become a member of the Staking economy.
In summary, PoS is rising:
Staking can earn income, inflation is not diluted
Low barriers to entry in consensus
No economies of scale, more to the center
Block chain maintenance cost
1:1 voting, governance more transparent
To maintain consensus (such as Validator) has a higher incentive and community
More environmental protection
It is worth mentioning that several advantages mentioned above is a certain cost and cost. PoS there is no historical data like PoW traceable. The future, with the overall market matures, we will see the development path of PoW and PoS more and more complete, more convenient for us to learn. Of course, not a chain ClickTracks situation, not only as an algorithm exists. Such as the Decred PoS+PoW hybrid system may become more and more popular, but this is another topic.
(the original Cobo compiler, this article does not represent the views of Cobo)