PoW and PoS Algorithms
The main process for the network is the transaction process, which is technically related to the addition of a new block to the ledger. Adding a block is carried out according to a certain consistent algorithm — the consensus algorithm.
At the same time, consensus is ensured by constancy: each network node reaches the same state after processing each transaction and each block. That is, the consensus algorithm ensures that all nodes of the network always have the same version of the blockchain and eliminates conflicts between nodes.
The most popular of these are two varieties: Proof of Work and Proof of Stake.
The Proof of Work (PoW) algorithm requires the author of a new block to solve a mathematical problem, and this problem is solved only by direct enumeration of the value. The classic option is to find a special value for the hash of the block header containing a link to the previous block implemented in Bitcoin.
The task is solved by all applicants for the addition of the block, and the chance to solve it faster than others and, accordingly, receive a reward depends on the amount of available computing power. The greater the processing power of the node — the higher the chance. The necessary speed at the same time is provided by the selection of the complexity of the problem to be solved, depending on the aggregate power of the network nodes.
Proof of Stake (PoS) is an alternative to PoW and a solution to the problem of high electricity costs for Bitcoin mining. However, the idea of PoS was mentioned back in 2011 at the Bitcointalk forum. Instead of mining in PoS, network participants freeze a certain number of tokens in wallets. After that, the algorithm selects among the participants the next block producer, depending on the size of the bet. In this way, participants reinforce good faith not with the cost of computing, but directly with assets within the network.
In PZM Cash, we abandoned the delegated Proof of Stake and applied the significantly improved “classic” PoS algorithm. Due to this, the opportunity to participate in the work of the network (and receive remuneration) has received a very wide circle of users — there are no significant restrictions or any significant barriers to this. POS is also subject to centralization, however, buying coins is much easier than buying equipment and setting up mining (as in POW), which provides an internal mechanism that restrains monopolization due to the large number of coin purchasers and owners.
