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The blockchain world heavily adheres to the reliable protocols associated with creating effective networks. They enable networks to agree on a transaction’s “truth” and ensure that a network agrees upon the transfer of assets from one owner to the other. Proof-of-work and proof-of-stake are the two predominant protocols in the blockchain landscape. The earlier of the two protocols is proof-of-work (PoW), wherein, when a new transaction is added to the blockchain, a community of computing nodes serving as miners compete against each other to solve the various difficult cryptographic problems. Those answering the problem first add the transaction to the blockchain and in exchange, fractions of cryptocurrency are rewarded. At a larger stage, the transaction is broadcasted across the entire network, sealing its status as “truth” and impossible to erase. However, it is energy intensive, giving concentrated power in the hands of mega bitcoin mining operations making hardly scalable.
Proof-of-Stake (PoS) in comparison to PoW has lower energy requirements as it doesn’t force mining blocks to compete for the right to solve hashes and add transactions. In PoS, the network allocates mining rights based on token ownership shares. Similar to PoW, PoS networks also broadcast all transactions across the entire network, so an irrevocable “truth” is agreed upon. Both are also subject to oligarchical control and bottlenecks as broadcasting transactions across entire networks become increasingly laborious as the system grows.
In the years to follow, there is every possibility that blockchain networks may not rely solely on PoS or PoW protocols. Blockchain protocols describe the power structures and values and technologies involved in the entire blockchain network they run on. Thus, future protocols need to be more scalable, secure, and accessible to all the participants in the network. Many blockchain startups are looking to adopt more sophisticated protocols that will tackle these issues while staying true to blockchain’s decentralized ideology.
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