PoW, PoS, and now… EOS is using DPoS? What is going on? For those still getting acquainted with the wonderful world of cryptocurrencies, all these initialisms and acronyms can get confusing and difficult to understand, but they don’t need to be. Let’s take a look at the EOS platform that’s been gaining a lot of traction and attention recently, and see what exactly is going on under the hood with “DPoS” and what makes it different from the Ethereum network. We’ll make all of this much easier to understand so you can get an idea of what each project is doing.
What’s Going on When We ‘Mine?’
Before getting into some of the key differences, let’s have a quick refresher on what “mining” is doing in the cryptocurrency world. Yes, it’s true that miners find more Ether, Bitcoin, and EOS, but those coins are the rewards for people mining, not the reason mining exists. So, what does mining do?
Since we’re looking to keep things simple and focus on the importance of the differences between EOS and Ethereum, we really just need to know that besides being rewarded with coins, mining is designed to keep the public ledger up to date and ensure that the blockchain is maintained. Mining is how we can confirm that each transaction occurred and make sure there is no double-spending of coins and token. There are a few different ways to do that, but since we’re talking about EOS, which uses Delegated-Proof-of-Stake (DPoS), let’s take a look at what that is and how it stacks up to one of the other popular cryptocurrencies in the market right now: Ethereum.
At the moment, the Ethereum network is still running on the Proof-of-Work (PoW) consensus model in a very similar way to Bitcoin. There is a possibility that the platform may shift to running on Proof-of-Stake (Pos), but that hasn’t occurred yet, so, for the time being, Ethereum is still running PoW. There’s nothing inherently wrong with PoW, in fact, it’s what really started the cryptocurrency movement with Bitcoin. However, there are definitely some ways we can improve on it, and that’s what EOS set out to do by forgoing PoW for Delegated-Proof-of-Work (DPoS). Let’s take a look at some of the differences between the two and compare how they stack up against each other.
What’s the Difference? A Quick Rundown
- PoW requires strong computational power to find blocks and reward miners
- DPoS requires a “stake” in the network to be eligible for confirming, or “mining,” transactions
- PoW theoretically allows anyone to mine, but the barrier to entry is high due to the current mining difficulty
- DPoS allows for stakeholders to vote on “delegates” to confirm transactions
- DPoS allows for stakeholders to remove “delegates” for bad behavior, an option not available for those in the Ethereum network
This is definitely one of the biggest differences between the two options. PoW requires a lot (and I mean a lot) of power to function. You’ve likely already seen pictures and videos of some of the Ether mining rigs before. Imagine big, bulky setups with graphics cards ticking away working on PoW. Not only are we talking about massive amounts of computer resources being used up, but large electricity bills and energy being used on it and the deterioration of the hardware used. This is where DPoS has saw room for improvement.
With concerns growing about the environmental effects of mining with Ethereum and Bitcoin’s PoW consensus, EOS is helping to usher in the new age of DPoS where significantly less power is used to reach consensus. In fact, unlike the Ether mining rigs, those mining on DPoS can use just their laptop, or even a Raspberry Pi, to mine DPoS coins like EOS. Resource consumption is one of the primary factors driving innovators to find alternatives to traditional PoW and that’s exactly what EOS is doing.
More Democratic and Decentralized
Though PoW started off with a very decentralized network, things are starting to shift in the current state of the crypto markets. Due to an influx in large-scale Chinese mining farms and other massive mining pools, the percent of PoW coins mined by a single group is becoming larger and larger.
DPoS mitigates this by not allowing these types of groups to corner the market simply by having the most hardware available for mining. Though one could theoretically corner the market by staking enough of a coin in PoS, it wouldn’t be advantageous for them to manipulate the coin because of their own vested interest in the project. Then, when adding DPoS to the PoS world, those who are mining are democratically chosen and by attempting to abuse their role in the network, they’re essentially guaranteed to lose the right to mine in the future.
With the true decentralization and democratized mining in place, DPoS also significantly improves the security for a given coin, like EOS, because of the very nature of staking. Even if one entity was to gain enough authority over the network to manipulate and compromise system, there would be no rational reason for them to do so after having spent so much money gaining the EOS to stake in the network. On top of that, because the delegates are chosen by stakeholders, a delegate acting poorly or unethically can lose their position and be taken out of the system.
So: EOS vs Ethereum Network?
When we take a look at where the future of cryptocurrency is headed, and what the major pain points are for the industry, it starts to become pretty clear that PoS is just about a necessity. The power and computing power consumption alone is going to pose a big obstacle for Bitcoin and Ethereum if changes aren’t made.
It’s certainly possible that Ethereum could switch to a PoS system, rather than a PoW, but for now that’s the path it’s on. With lightning fast transaction speeds, minimal energy consumption, and a more democratically organized decentralized network, it’s clear that DPoS will be a clear winner over PoW and make significant improvements on PoS concept as well.