In order to ensure consistency and security of transaction records in a distributed environment, a mechanism is needed to allow all participants in the network to reach consensus on the effectiveness of blocks. This mechanism is called a consensus mechanism, which is the core of a decentralized accounting system. Different consensus mechanisms differ significantly in the way they achieve this, and thus bring about their respective characteristics and trade-offs.

Proof of Work (PoW)

1. Proof of Work is a consensus mechanism adopted by early blockchain projects such as Bitcoin. It requires participants to solve complex cryptography problems by consuming computing power.

2. Which participant (i.e. miner) is the first to find the solution to the problem, he has the right to create a new block and add it to the blockchain and receive the corresponding cryptocurrency reward. This process is highly competitive and requires a lot of computing resources.

3. The security of the PoW mechanism comes from the huge cost of performing computing work . If an attacker wants to tamper with the data on the chain, he or she needs to master more than half of the computing power in the entire network, which usually requires extremely high hardware and power costs.

Proof of Stake (PoS)

1. The proof of stake mechanism is another major consensus method that relies on the number of cryptocurrencies held by participants to determine their rights and probability of creating or verifying new blocks.

2. In the PoS system, participants holding more network tokens (called validators) have a higher chance of being selected to verify transactions and generate blocks. They don't need to do a lot of computational work like PoW.

3. Verifiers participate in the consensus by pledging the tokens they hold . If validators attempt to commit fraud or malicious behavior, the tokens they pledged may be confiscated (fined) by the system, which provides an economic binding force.

Differences in mechanisms

1. Energy consumption is the most commonly mentioned difference between PoW and PoS. PoW consumes very high energy because it relies on large-scale computing competitions; the PoS mechanism significantly reduces the energy consumption required by consensus processes because it does not rely on the competition of computing power.

2. Different ways to achieve security guarantees. PoW relies on powerful computing power to prevent attacks. The cost of attack is to acquire and maintain sufficient computing power; PoS relies on economic incentives and punishments, and the cost of attack is to acquire a large number of network tokens and face the risk of being confiscated.

3. There are differences in the threshold for participating in consensus. Participating in PoW usually requires purchasing expensive professional mining hardware; participating in PoS mainly requires holding a certain amount of cryptocurrency and pledging , which may lower the hardware threshold for ordinary users to participate.

4. Both face potential centralized risks, but their manifestations are different. PoW may be centralized because its computing power is concentrated in a few large mining pools; PoS may be centralized because its vast majority of equity is concentrated in the hands of a few early or large holders.

5. The issuance or distribution of new currencies is also different. In PoW, the new coins are mainly allocated as mining rewards to miners who contribute computing power; in PoS, the new coins are usually allocated as staking rewards to validators participating in verification.

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