Proof-of-Work v/s Proof-of-stake v/s

Delegated-POS v/s
Proof-of-Importance

1
 Proof-of-Work
● Proof of Work is the consensus algorithm where miners compete to solve a difficult mathematical
problem based on a cryptographic hash algorithm. This proof proves that a miner did spend a lot of
time and resources to solve the problem. When a block is 'solved', the transactions contained are
considered confirmed.
● Miners receive a reward when they solve the complex mathematical problem.
● For example in Bitcoin miners receive 12.5 bitcoins, which will reduce to 0 by 2140.
● Miners can also receive rewards in the form of transaction fees.

Copyright © Blockchain Council www.blockchain-council.org 2

 Proof-of-Work

Copyright © Blockchain Council www.blockchain-council.org 3

 Proof-of-Work
● Transaction Validation after mining:
● Valid data includes:
1. Block header hash is less than the target
2. Block size is within acceptable limits
3. Block timestamp is less than two hours in the future.
4. The first transaction is a coinbase transaction ( and only the first )
5. The coinbase transaction has a valid reward.
6. All transactions within the blocks are valid ( also have a checklist on their own )
7. If the block is valid, the other miners will update their own copy of the blockchain with the new
block

Copyright © Blockchain Council www.blockchain-council.org 4

 Example
Example Bitcoin:

In Bitcoin, a block is mined every 10 minutes or so. The difficulty is calculated so that it never deviates too
much from this limit. If the difficulty stays the same in the long term, while computer power increases, it
will take less and less time to mine a block.

To make sure this doesn't happen, the Proof of Work target is a dynamic parameter. In the Bitcoin world,
the target is adjusted every 2016 blocks. Then, we check the amount of time it took to mine those 2016
blocks. It should have taken 20160 minutes ( 2016 * 10 minutes ). The difficulty increases or decreases
depending on the time it took to mine those blocks.

Copyright © Blockchain Council www.blockchain-council.org 5

 Proof-of-Stake
● Proof of stake is a different way to validate transactions based and achieve the distributed
consensus.
● Unlike the proof-of-Work, where the algorithm rewards miners who solve mathematical problems
with the goal of validating transactions and creating new blocks, with the proof of stake, the creator
of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake.
● No block reward
● Also, all the digital currencies are previously created in the beginning, and their number never
changes.This means that in the PoS system there is no block reward, so, the miners take the
transaction fees.This is why, in fact, in this PoS system miners are called forgers, instead.

Copyright © Blockchain Council www.blockchain-council.org 6

 Delegated-Proof-of-Stake
● People in a particular cryptocurrency community vote for Witnesses to secure their computer
network.
● Only the top 100 Witnesses are paid for their service. The top 20 earn a regular salary. Because
many want to become a Witness, there are hundreds of backup Witnesses.
● People’s vote strength is determined by how many tokens they hold. This means that people who
have more tokens will influence the network more than people who have very few tokens.
● If a Witness starts acting strange, or stops doing a quality job securing the network, people in the
community can remove their votes, essentially firing the bad actor. Voting is always ongoing.

Copyright © Blockchain Council www.blockchain-council.org 7

 Delegated-Proof-of-Stake
● Delegates are elected in a manner similar to witnesses. A delegate becomes a co-signer on a
special account that has the privilege of proposing changes to the network parameters. This account
is known as the genesis account. These parameters include everything from transaction fees, to
block sizes, witness pay, and block intervals.

Copyright © Blockchain Council www.blockchain-council.org 8

 Proof-of-Importance
● In proof of importance every account on the blockchain is assigned an importance score. This score
will influence how individual users can “harvest” the blockchain. One could say harvesting on the
blockchain is almost the same as what miners do on the Bitcoin blockchain. The objective is to add
people’s transactions to the blockchain, in exchange for a small financial reward. As people’s
importance score grows higher, they will have a better chance at getting these rewards.
● In order to be eligible for the “importance calculation,” users need to have at least some currency in
their balance. For example in NEM Blockchain, there are just under 9 billion XEM in circulation, and
you need to have at least 10,000 XEM to be eligible for the importance calculation.

Copyright © Blockchain Council www.blockchain-council.org 9

 THANK YOU!
Any questions?
You can mail us at
hello@blockchain-council.org

Copyright © Blockchain Council www.blockchain-council.org 10