Proof Of Work
- The 51% attack is the one known pitfall of the blockchain Proof of Work mining method.
- Miners are blockchain building nodes.
- Miners get reward for building blocks the fastest.
- More mining power (nodes) means you have more chance to wind the reward.
- This has resulted is massive investment for mining machines, dominated by only a few groups (companies.)
- A corrupt group equaling a minimum of 51% – could intentionally confirm a malicious block containing altered data (in their favor you’d assume) – therefore destroying the integrity of the chain.
Proof Of Stake, The First Solution
- Proof of Stake was designed to remove the 51% pitfall, and replace it with mining rewards given to those with the most value staked in the given chain.
- So the cost of malicious alteration outweighs the value of their investment.
- When a blockchain is deemed corrupt all value is lost, so having a large stake in the integrity becomes much more important.
- Proof of Authority designed to use much less resources. PoA 2.0 blends the Byzantine Fault Tolerance (BFT) and Nakamoto Consensus types.
- BFT allows distributed networks to agree and execute based on majority say.
- The Nakamoto Consensus verifies the authenticity of a blockchain network – eliminating malicious actors in the BFT by randomizing validator selection.