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Whenever a transaction occurs on a blockchain, it needs a confirmation to make sure the cryptocurrency hasn't already been spent, and it is not used twice in similar transactions across several blocks.
It makes sense that with a decentralized platform, there is a unique way to do these checks, but how exactly do blockchains confirm transactions, and how secure is it?
There are two main forms of confirmation for transitions, known as Proof of Work and Proof of Stake. Both rely on the consensus method but have slightly different methods, security, and speeds.
What is Mining City?
Mining City is a platform that provides mining plans, giving users access to hash power and mining rewards. Hashpower is the computing power needed to generate cryptocurrencies.
Mining City users can buy crypto mining plans that give them access to hash power and mining rewards. Hashpower provided by Mining City is used to mine Bitcoin (BTC) and other cryptocurrencies.
To learn more about Mining City, its products and services visit Mining City’s official social media portals on Facebook, Instagram, Telegram, YouTube and Twitter.
Is Mining City Legit?
Absolutely! Mining City provides real hash power for users. Mining City also leaves banned markets and takes a compliant approach to new laws and regulations, adjusting to global markets. A good example of Mining City’s commitment to compliance is its recent implementation of KYC, AML, and other compliance check processes.
Whether you are looking for a platform that provides mining plans or software to secure your Bitcoin, how can you tell if a cryptocurrency player is legit?
Here’re 5 things to look for:
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Does the business provide a real product or service?
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Does the business leave markets when crypto products or services are outlawed?
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Does the business keep up with new regulations and legal compliance?
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Is the business transparent in their communications about what they are doing?
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Is the business making efforts to suppress real scams?
Why is it Important to Have a Confirmed Blockchain Transaction?
Keep reading to learn about why a confirmed blockchain transaction is useful, the differences between Proof of Work and Proof of Stake, and which one is better.
Having a confirmed blockchain transaction means that your transaction across networks has been secured. With each confirmation, a new block has been placed behind the block your translation is stored in, making it much less likely to be reversed. These confirmations are done via a consensus mechanism.
Currently, there are two consensus mechanisms, known as Proof of Work and Proof of Stake that help to reduce scams by having peers make sure that the transactions are true.
Why is Proof Important?
The proof is important because it allows for verified transactions without using a third party. The first one that was developed was the Proof of Work system. This system is used to determine how consensus is achieved on the blockchain. Put simply, it is how a transaction is determined to be valid and not a scam.
Currently, different platforms use different ways to find consensus. For example, Bitcoin’s platform uses Proof of Work while Ethereum uses Proof of Stake.
What is Proof of Work?
Proof of Work depends on using complicated equations or mathematical problems to prevent hacking or jamming. It is most common for mining cryptocurrency. This is highly secure and allows for a peer-to-peer network without any need for a central authority.
For mining, in particular, you often have people competing to use their computers to solve difficult math problems. The one who solves it the fastest gets the currency. Since the problem is so complicated, but easily verifiable by the network, it helps to prevent scams. The problem is then sent to others on the network for them to verify if it is true, and that consensus determines if the miner gets a block reward.
Since there has to be a consensus vote, it is almost impossible for anyone to double-spend, as it would be caught. Also, in Proof of Work, people are only allowed to mine on one chain so the chain would be rejected if someone tried to mine multiples at once.
One of the downsides of Proof of Work, however, is that it requires a lot of energy. It is also painfully slow sometimes, due to the information it has to sort through.
What is Proof of Stake?
Proof of Stake was developed in 2012 to reduce the energy dependency that came with Proof of Work. Instead of mining, the blocks are often forged or minted, though it is often still called mining for ease.
In the Proof of Stake method, the miners who have the most coins have the most power. Since it depends heavily on how much currency someone has instead of hard algorithms and consensus, it uses a lot less power, which makes it preferable in some areas. It is also a lot faster. People often don’t need as beefy computers as they would need for Proof of Work either.
However, security can go untested in Proof of Stake, which makes the system often less secure. Some are still fairly secure, as each block is created in chronological order, and contains the full ledger from the block before it. But the person with the highest stake is in charge of validating transactions, they have the opportunity to manipulate the system. The theory is that since they have the most to lose, they are less likely to be malicious at the risk of losing everything.
One of the other big security issues is that theoretically, people can double-spend. It doesn’t cost anything for foragers to mine on multiple chains, so the chance of someone double-spending and not being caught is much higher.
Where Proof of Work offers rewards to people who can mine the equation the fastest, Proof of Stake doesn’t offer coin rewards. However, those that validate transactions take the fees from the transaction instead.
Which One is Better?
Neither of these models dominates over the other. One of the biggest complaints about Proof of Stake is that it allows the rich to get richer, as they are the ones allowed to verify transactions. However, in Proof of Work, you need very expensive computer systems that can quickly process the equations. So those with more money can afford better and more of the computers, so essentially they are in the same boat.
It depends on whether someone wants more speed or security. Proof of Stake allows for large increases in transactions processed per second, going up from 30 to 100,000 easily. This is great for a large number of smaller transactions.
However, if a platform is focused on larger transactions and smaller numbers of transactions then Proof of Work is better, as it allows for more security.
Conclusion
Proof of Work and Proof of Stake both have their pros and cons. Bitcoin is known for using the Proof of Work method, which allows for more secure transactions at the expense of a much slower transaction rate. Ethereum chose to use the Proof of Stake method to boost how many transactions they go through in a second, but at the expense of losing some security.
Both rely on consensus methods to make certain the translation is true and there is no maliciousness with the process. In the world of decentralized financing, it is a great way to prevent people from using money they don’t have to make transactions and keeps everything that much safer.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.