Proof-of-Signature Superior to PoW and PoS
What are the flaws inherent in both Proof-of-Work and Proof-of-Stake that make Proof-of-Signature an ideal alternative? A short explanation is given below. How does Bitcoin validate transactions and deter denial of service attacks?
It requires a transaction-requesting entity to perform computational work. Inessence, it makes data creation difficult for users but data verification easy for the network. This system is known as Proof-of-Work, a well-known protocol used throughout much of the cryptocurrency world.
However, proof-of-work is hardly an ideal solution, as its intensive energy requirements are highly problematic. These requirements derive from the computations needed to validate transactions. In 2017, completing a single Bitcoin transaction requires as much energy as a regular household uses in a week.
Even the investor pays a price, as the burden of these energy costs indirectly produces downward pressure on cryptocurrency prices. In addition, by relying upon miners, Proof-of-Work networks leave themselves open to attack. As user fees decline over time, the financial rewards of mining (via transaction fees) naturally dissipate.
With fewer miners available, the remaining miners have greater leverage over a network’s computational power. If they’re able to control 51% of a network’s computational power they can instigate a 51% attack. The latter enables the attackers to produce fraudulent transaction blocks and even invalidate particular transactions.