Proof-of-Work (PoW) is the most common mining algorithm that is being used across major blockchains around the world. It is essentially used to verify transactions that are happening across the network. In this algorithm, a complex hash verification process is needed to be done by the miners which requires a lot of computing power. Miners which possess expensive and heavy-duty hardware have more chances of solving the hash puzzle. Once a hash puzzle is solved by a miner, a reward is given to that specific miner.
The entire point of blockchain is to eliminate centralization from any framework but as a result of PoW, this idea is gets violated. Some forces present in the mining community employ not-so-easy to afford hardware with heavy-duty computing power to improve their chances of getting the reward. As a result of this, centralization comes into the picture in an arena whose entire goal is decentralization.
Another major issue presented forward by PoW is the issue of over-usage of electricity. The mining rigs need to be on all the time and as a result, a large amount of energy is needed. Over usage of electricity is one of the factors contributing to global warming overall.
Besides PoW, another important mining protocol presented by the experts in the crypto arena is Proof-of-Stake, also known as PoS. It is based on the protocol that whoever has a large stake in the mining network has more chances of getting more rewards. This again introduces the issue of centralization.
Despite all these major shortcomings, why are PoW and PoS the most prevalent mining protocols as of yet?
Talking to blockchain regarding the comparison between PoW and PoS, Łukasz Matczak, a developer at Webchain, shared his views as:
PoW for example has advantage that it’s easy for everyone to take part in network. without initial investments etc.
Regarding the usage of PoS because of the centralization issue in PoW, Łukasz stated:
But PoS has a similar issue. People with higher capital have the advantage.
If one looks at the picture from different angles, it becomes clear that both the algorithms have the issue of centralization embedded in them. There is a strong need for an algorithm that eliminates this issue and makes sure every miner participating in the network has an equal chance of getting the reward.
Talking about a new solution, Łukasz stated:
One possible solution is to create new PoW algorithm that tries to decrease differences in performance between machines.
As the crypto world grows bigger and bigger with decentralization as its main motto, the need for a genuinely decentralized algorithm also grows rapidly.