Hybrid PoW/PoS

What Is A Hybrid PoW/PoS?

A Hybrid PoW/PoS is a consensus mechanism that uses the Proof of Work (PoW) and the Proof of Stake (PoS) systems on a blockchain. Instead of using only one, the hybrid PoW/PoS consensus mechanism uses both systems to reap their strengths and balance their weaknesses.

Deeper Definition

Blockchain is a distributed database containing records of all transactions executed and shared among participating parties. A consensus mechanism is a system that blockchain validators use to determine what information gets stored permanently in the blockchain. Since blockchains distribute transactions across multiple nodes, it needs a system to synchronize all nodes and ensure an agreement on the kind of transactions to add or exclude from the blockchain. There are several consensus mechanisms that different blockchains use to power their network. However, the two most popular blockchain consensus mechanisms are Proof of Work (PoW) and Proof of Stake (PoS).

Blockchains that use the PoW, such as Bitcoin, rely on miners solving complex mathematical puzzles to create new blocks. Typically, miners need to deploy sophisticated hardware with extensive computational power to increase their chances of solving the puzzles. Miners get rewarded with new tokens for each puzzle a miner solves, which is how new tokens get created on the blockchain. While many blockchains favor the use of PoW over others, certain concerns and limitations make it less appealing, and they include speed and scalability issues.

Blockchains that use the PoS consensus mechanism require participants to stake a certain amount of the blockchain’s native token to become a validator. The system trusts that those with the most stake will make responsible decisions for the entirety of the network. PoS solves the speed, energy, and scalability problems of PoW. It allows users to mine for rewards using minimal resources and rewards them with new tokens and network transaction fees. The higher the number of tokens a user takes, the higher the number of blocks they validate, which translates to more rewards.

The hybrid PoW/PoS consensus mechanism utilizes PoW and PoS systems elements when determining transaction validation rights on a Blockchain. By doing so, it aims to mitigate the weaknesses of each consensus mechanism.

Hybrid PoW/PoS Example

Decred is a cryptocurrency created to provide a solution to Bitcoin’s scalability problems. It is the first blockchain to combine the benefits of both PoW and PoS consensus systems on its blockchain. They designed the unique system to prevent either miners or large stakeholders from dominating the network.