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Proof-of-Work vs. Proof-of-stake: The Best For Scaling Blockchains

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Proof-of-Work vs. Proof-of-stake

Proof-Of Work vs. Proof-of-stake: The Best For Scaling Blockchains

Proof-of-Work vs. Proof-of-Stake

If you want to know more about Proof-of-Work vs. Proof-of-Stake, this post offers great insight. Between proof-of-work and proof-of-stake, which one is the best for scaling blockchain systems? We will answer this question and more in this article. Over the years, scaling has been a big issue for cryptocurrency transactions. In the cryptocurrency world, network validation often comes in two forms; proof-of-stake or proof-of-stake. Although there are many others, these two are very common and power the popular blockchain systems.

Also Read: How to Store Your Bitcoin and Keep it Safe

These two processes solve the problem of “verifying transaction” but with different approaches. Both approaches offer different solutions to the problem of cryptocurrency scaling. Does one process have an advantage over the other, or are they just different ways of doing the same thing?

Both of these cryptocurrency transaction validation processes are called consensus mechanisms. They are required to confirm transactions that take place on the blockchain without the need for an intermediary. By the end of this article on Proof-of-work VS Proof-of-Stake, you will perfectly understand each of these consensus mechanisms. We will start with the basics of each model and how one differs from the other.

The Basics of Proof-of-Work vs. Proof-of-Stake

In his bid to develop the first cryptocurrency, Bitcoin, Satoshi Nakamoto has to find a way to verify transactions without intermediaries. He achieved it when he created the Proof-of-Work consensus mechanism. The essence of the Proof-of-work system is to determine how blockchain reaches consensus.

Proof-of-Work system is based on an advanced form of mathematics known as cryptography. It is on this basis that digital coins like Bitcoin, Ethereum, Litecoin, etc. are called cryptocurrencies. Cryptography uses advanced mathematics that only powerful computers can solve. No two of these mathematical equations are ever the same. This means that once the problem is solved, the network knows that the transaction is genuine and authentic.

Many blockchain systems copied the original Bitcoin code; hence they also use the Proof-of-Work consensus model. Although the Proof-of-Work consensus protocol is great, it has its shortcomings. It needs a significant amount of electricity, and it also has a limited number of transactions per second. These shortfalls of Proof-of-Work lead to the creation of other consensus mechanisms. One of these consensus mechanisms created to solve the problem of Proof-of-Work is the Proof-of-Stake consensus mechanism.

Scott Nadal and Sunny King both developed the Proof-of-Stake model in 2012. At the time of the launch, both developers argued that the Proof-of-Work model of Bitcoin requires the equivalent of $150,000 daily electricity cost. Interestingly, the figure has increased to millions of dollars currently. Peercoin was the first blockchain project to adopt the Proof-o-Stake consensus mechanism. The initial benefits were an equal mining system, better scalable transactions, and less reliance on electricity.

Now that you have known the basics of Proof-of-Work VS Proof-of-Stake, we go further to explore the adoption of these consensus mechanisms.

The Adoption of Proof-of-Work VS Proof-of-Stake

Bitcoin blockchain was the first to adopt the Proof-of-Work (PoW) consensus protocol. The PoW network takes about ten minutes to confirm a transaction and can handle about 7 transactions per second. This has increased the transaction fees from the time the project started in 2009. The initial Bitcoin transaction fee was a fraction of a cent. However, during the busiest period of December 2017, the fee increased to $40 per transaction.

Although Bitcoin transaction fees have been reduced, they are still too high to serve as a suitable global payment system. The limitations of the Prof-of-Work consensus mechanism is the precursor of these issues. Ethereum is the second most popular cryptocurrency, and like Bitcoin, it uses a Proof-of-Work consensus mechanism. However, the developers of Ethereum made a few changes to the original code. These changes enabled the network to process transactions in about 16 seconds. Although this is not the fastest in the crypto space, it is far better than the 10 minutes it takes Bitcoin.

Also Related: What is Lightning Network and how does it work?

Meanwhile, the scalability issues of Proof-of-Work haven’t been solved. The Ethereum blockchain processes a maximum of 15 transactions in a second. This is substantially lower than what the network needs. Ethereum’s Proof-of-Stake launch date isn’t yet official, but it has the potential to increase the number of transactions to thousands per second. Other blockchains like Bitcoin Cash and Litecoin have also installed the Proof-of-Work consensus mechanism. Meanwhile, cryptocurrencies like Dash use the Proof-of-Stake model, which allows them to send and receive funds in seconds.

NEO is another popular blockchain that uses the Proof-of-Stake model, and it has had a great journey since it was launched in 2016. The adoption of the Proof-of-Stake model by NEO increased its value to more than 100,000%.

Proof-of-Work VS Proof-of-Stake Energy Consumption 

When we talk about Proof-of-Work VS Proof-of-Stake, one of the major discussion points is the energy consumption difference. In Proof-of-Stake (PoS), energy consumption is minimal compared to Proof-of-Work (PoW). In PoW, miners have to solve complex mathematical puzzles that are computationally intensive. It means that their hardware uses lots of electrical power to solve these computational problems.

On the other hand, PoS depend on little electrical power to run. Considering the bright future of cryptocurrency, PoS will be good for the environment. It means that the more we use PoW, the energy consumption will also grow.

The Security of Proof-of-Work VS Proof-of-Stake

In more than one decade of Bitcoin’s existence, Proof-of-Work is yet to fail. It has shown its resilience over the years. Meanwhile, PoS is undoubtedly a great idea, but it isn’t yet tested like PoW. This is not good, especially when peoples’ money is on the line.

Another big security worry for Proof-of-Stake is the outcome of cases of disagreement between members of the community. When blockchain splits or forks result from a disagreement between community members, PoW miners will have to decide where to direct their mining power. They will have to choose between the newly forked blockchain or the original blockchain.

For these PoW miners, splitting their mining power is uneconomical as it will reduce their chances of mining crypto on either of the two chains. This will discourage constant forking by users who want to go after newly created money to the detriment of the network’s integrity.

On the other hand, Proof-of-Stake allows validators to validate the transactions f both chains resulting from a fork. Validators can do this without consequences since PoS doesn’t take additional resources like mining power. It means that users can create multiple forked cryptos using the PoS consensus mechanism. Users can “double spend” crypto or even spend the same unit of cryptocurrency twice.

They can do this by spending it on one blockchain and then forking or splitting from the old blockchain to create a new one where the spending transaction does not exist. However, solutions like lashing or confiscating of stake for bad behavior have been proposed to tackle the “nothing at stake” problem.

In the case of a malicious attack like the 51% attack, Proof-of-Stake may be more secure than PoW. It will be more expensive for attackers to execute the 51% attack on PoS. Meanwhile, an attacker will have to buy lots of mining equipment before attacking the PoW system, and it will be expensive. However, it will be more expensive to buy 51% of a PoS crypto’s outstanding currency. The reason is that buying that much will drastically increase the price as a purchase is being made. Every purchase pushes the price higher and higher. Also, buying that amount of crypto from different parties will be close to impossible.

Conclusion 

Some people have the opinion that one of these consensus mechanisms is better than the other. However, it is difficult to reach a consensus for Proof-of-Work VS Poof-of-Stake. PoS may seem to be the better one when we look at energy consumption. Meanwhile, PoW has been in use for more than a decade, unlike PoS.

On the other hand, there might be other advantages and disadvantages of these two consensus mechanisms that we are yet to think about. At the moment, it will be safe to say that Proof-of-Stake is another interesting development in the rapidly evolving blockchain space. With time, we will see where it leads and its impact on the broader blockchain ecosystem.

 

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Top 10 Blockchain Startups in Nigeria 2020

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Over the years, modern technology has been dominated by companies based in first world countries. However, technological resources shouldn’t be located exclusively to a minute part of the world. In reality, the possibility of technology invading every sphere of human endeavor with its potentials can only be achieved when tech resources are distributed globally, as well as their use in helping local populations who are already showing a degree of commitment to improving their developing communities. More so is the advantage of knowing which of the crypto companies to invest in and how. With this list of the top 10 Blockchain Startups in Nigeria 2020, you can never be wrong in your choices!

In Nigeria, Africa’s largest economy, a number of blockchain startups are growing to meet the need for a cryptocurrency-thirsty populace. This is regardless of the fact that cryptocurrencies are not yet accepted legal tender in the West African country. Between April and June this year (2020) alone, $34.4 m was transacted in Bitcoin in Nigeria, the largest share on the continent. As stated by Usefultulips, South Africa followed behind with $15.2 m; Kenya with $7.8 m; Ghana, $ 640,000 and Tanzania $600,000.

It should not be alarming, therefore, that useful platforms through which cryptocurrencies are traded are springing up in handful places around the country.

Of all these platforms, I bring to you those that I consider the top 10 of Blockchain startups in Nigeria. See them below:

Top 10 Blockchain Startups in Nigeria 2020

(1) Quidax

Co-founded in 2016 by Uzo Awilli and Buchi Okoro, Quidax allows its users to freely purchase as well as sell cryptos in their local currency. Trading in Ethereum, Ripple, Bitcoin, Litecoin alongside other cyptocurrencies can be easily done on Quidax.

(2) BuyCoins

Provided by Bitkoin Africa, BuyCoins was founded in 2017 by Timi Ajiboye, Tomiwa Lasebikan and Ire Aderinokun. BuyCoins has a funding of $120,000. Users on BuyCoins have the opportunity to buy and sell cyrptocurrencies within a very short range of time.

BuyCoins conduct their services via their app, taking off prospective traders the stress of seeking other traders in the crptocurrency market. BuyCoin supports Bitcoin Cash, Litecoin, Bitcoin and Ethereum. Cryptos can be traded via their app which is available for IOS and Android devices.

(3) Bundle

Bundle is provided by and backed by Binance and was founded by Yele Bademosi. With Bundle, users can sell or buy Ethereum, Bitcoin and BNB. They also offer their customers the opportunity to buy cryptocurrencies using bank or card transfer. Proceeds from sales of cryptos, could also be withdrawn and deposited into your commercial bank account. With just N500, you can trade in BNB or Bitcoin.

(4) Yellowcard

Yellowcard provides users services for purchasing cryptos via the internet through debit cards or bank transfer. With this, they (users) can load their back accounts in the local currency, before paying for the digital coins they’re interested in. Currently, Yellowcard is in support of dash and Bitcoin core and would be adding tether (USDT) and Bitcoin cash (BCH) in the days ahead. Yellowcard is founded by Chris Maurice

(5) Patricia

With a dynamic operating mode, Patricia makes trading in cryptos like Ethereum, discounted gift cards, Bitcoin, Perfect money, etc. easily available to prospects.

(6) ABiT Network

Founded by Gauis Chibueze (aka Bitcoin Chief), ABiT Network provides blockchain e-commerce services throughout Africa. Some of ABiT’s products include ABiT Play, ABiT Go, ABiT Farm, ABiT Reps, ABiTCrowd, ABiTrader, and Tatcoin. For instance, with ABiT Reps, ABiT offers youths the opportunity to earn by telling others about ABiT products. Their apps can be found on different online stores such as Android and IOS.

Top 10 Blockchain Startups in Nigeria 2020

(7) CryptoTvPlus

CryptoTvPlus is one of the leading media agency on the continent. They provide the latest info on events, updates, project reviews in the digital currency market. They have an active online presence on Facebook, Twitter and YouTube with an application for easy access on Google play store. Founded in 2018, Cryptotvplus has a revenue of $ 15.40 million.

(8) Bitfxt

Bitfxt is another Nigerian cryptocurrency startup. Recently, in February 2020, they secured N5.45 billion from UK-based Payitup clearinghouse Ltd in a bid to expand their cytocurrency infrastructure. Traditionally, Bitfxt deals in Bitcoin and allows trade from prospects all around the globe.

(9) Roqqu

Founded by Uchenna Nnodim, Roqqu provides a speedy platform for the buying and/or selling of cryptocurrencies. Within thirty minutes, withdrawals are completed using Roqqu. They support EOS, STEEM, Ethereum and Bitcoin transactions. Like other cryptocurrency trading platforms, Roqqu has an app on Google Play store for easy trading. Traders on Roqqu are referred to as Roqquians.

(10) NairaEx

Founded in 2015, NairaEx has recorded over hundred thousand users with over one million transactions. They are one of the most popular in the digital currency market on the continent. NairaEx is a top blockchain company in Nigeria where cryptocurrencies such as Litecoin, Bitcoin Cash, Ethereum, and Bitcoin are traded. They are a reliable company for the exchange of Bitcoin and other cyptos through common payment platforms. NairaEx allows users to fund and withdraw within the same day.

11.Conclusion

The majority of the blockchain companies mentioned and discussed in this piece and others not mentioned here are founded and spearheaded by young Nigerians. These are highly spirited individuals who are seeking novel solutions to ancient problems in their immediate environment.

Ranging from agriculture, to the energy sectors and the financial payments service industries, these startups are making life better for many. You should find a way and align with the current trend. There is something for you if you invest in cryptocurrency today.

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