BTC’s PoW Allegedly Has Critical Defects
Crypto journalist Gerald Fenech, who writes for Forbes regularly about global politics, the economy, and also blockchain tech, has recently debated the fact that BTC’s consensus algorithm PoW features some critical flaws.
PoW Poses Some Challenges
While Fenech mentions that some well-known challenges exist, which could result in a seriously detrimental outcome, he doesn’t really mention what these flaws are. However, most users know that cryptos relying on PoW algorithms take up a huge amount of energy since the process of verifying blocks on such networks is achieved through mining, which consumes a lot of energy.
Another issue with crypto platforms based on these types of algorithms is the purchase and operation of costly equipment, which needs an individual who understands the mechanisms of the hardware and who is also able to pay for it.
The Issue of Centralization
People worldwide have decided to combine their resources to build mining farms due to the high cost of operation related to the process. However, a lot of critics and a research study by Princeton University expressed that this will lead to centralization. The study revealed that most BTC mining is done through a limited number of places in China. It was concluded in the study that there are critical risks because of the centralization issue of the mining operations.
Fenech didn’t really refer to these possible PoW issues, but he talks about a potential alternative in the PoA protocol which he sees as something that will become quite common with blockchain in the future.
Fenech goes on to say that PoA has the users staking their real identities. One validator is identified personally and authenticated on the exchange platform, which makes them a trusted node. So, users who validate their identities can now authenticate blocks within the chain. They get rewards of cryptos publicly and any activity that is malicious will also be public, which means that these users have their reputations to uphold when operating within a highly secured network.
Furthermore, Microsoft is currently using the PoW protocol within its ETH cloud computing service called Azure, which is a BaaS product which is used to set up and build an ETH-based blockchain system in a matter of minutes.
PoA Has Conditions
The main difference between the two algorithms is that PoA does not need any computational power for operation because mining cryptos is not necessary and it is only used when participating members are already believed to be reputable. Therefore, it is very easy to reach a consensus with this type of network.
However, PoA will not always be the right choice to replace PoW protocols as its implementation is more compatible with private blockchains. While public PoAs do exists, like the Kovan exchange network, it is sometimes argued that its security within a DLT-based platform is more centralized.
It is stated that sometimes there exists a single authority node or even a few of them making decisions for PoA blockchains, but in that case, blockchain won’t be needed anymore and a database would be sufficient.