Use of the Proof-of-Stake Algorithm for Distributed Consensus in Blockchain Protocol for Cryptocurrency

Recent attention to Bitcoin and other cryptocurrencies has opened investors and the public to the realm of digital currency. Greater exposure around the world has led to a frenzy of entry into the market and a test into the long-term feasibility of Bitcoin being able to remain a functioning peer-to-peer (P2P), decentralized currency. Its main structure is supported by the Proof-of-Work (PoW) protocol in which users can elect to participate in determining transaction approval and ensuring an honest blockchain. This system relies on elected users to expend computational power and energy to solve puzzles to prove the accuracy of the network’s transactions and create new blocks. Each cryptocurrency uses their own method to ensure blockchain accuracy, and this paper will focus on how a Proof-of-Stake (PoS) protocol is a superior algorithm to PoW by assigning mining ability equal to one’s stake within a coin, rather than her energy consumption, among other factors. We will discuss Bitcoin’s PoW as a baseline for our eventual analysis of PoS in terms of advantages and performance metrics. The main factors that can be compared between the two protocols is how each system can prevent itself against a variety of attacks from adversarial users within the network, as well as long-term sustainability. Finally, we will use the Cardano (ADA) cryptocurrency by IOHK as a case study for understanding how their Ouroboros Praos PoS protocol works. Our goal is to show how long-term adoption of PoS framework is more realistic from an energy perspective than PoW