Analysis of POW in Bitcoin and POS in Peercoin

Abstract

The technology of blockchain, which is the underlying technology of cryptocurrency like Bitcoin, has changed the world dramatically and it has fascinated researchers from all over the world. Originating from the Byzantine General Problem, the consensus mechanism is utilized to reach an agreement in a group where the channel for communication could be unreliable. Among all the consensus mechanisms in the blockchain, proof of stake (POS) and proof of work (POW) are the most widely used. POW was first used in the Bitcoin blockchain and soon became its central consensus mechanism of it and the earliest implementation of POS for cryptocurrency was Peercoin. Numerous research has been done in this field, but they failed to explain the features of the two mechanisms comprehensively. In this paper, the author did a brief introduction to the hash function and consensus mechanism as well as how POW and POS work, then made detailed analysis and comparisons of a POW in Bitcoin and POS in Peercoin in terms of fairness, security, environmental influence, penalty, negotiability and sustainability, and future trend, and declared that both of POS and POS had some advantages and drawbacks. The author also listed some risks and potential problems of POW and POS and then gave possible solutions for them.