According to their Whitepaper, DeepOnion uses a combined PoW (Proof-of-Work) and PoS (Proof-of-Stake) consensus algorithm to confirm transactions in its own blockchain. Recently there were many discussions on the DeepOnion community board about switching to a PoS only coin, so I assume this will be a topic on vote central (DeepOnion's voting platform) in the near future.
This is an important topic and I wrote this article to summarize the main advantages of both mining types and the combination of them. I want to help to get more qualified votes.
DeepOnion Hybrid PoW/PoS Overview (Credits to @Cryptomaster)
Let me first clear up what the purpose of these algorithms are. Mining is required in decentralized systems to validate your transactions, generate new blocks and achieve distributed consensus. The classic Proof of Work mining process requires computation power. Basically you have to brute force a solution for a mathematical task and compete with others to be the first one and get the reward.
Proof of Stake uses a more eco-friendly way to achieve a distributed consensus over all nodes. It depends on a random selection and the amount or stake on an address. Depending on the implementation there is also a factor called 'coin age' where you can only stake after a defined amount of time after you received your funds on an address.
What are the advantages Proof of Work?
- Established
The most famous cryptocurrency, bitcoin, uses PoW for a few years and the algorithm is matured and widely used. - Encourages the use of the currency
Miners need to invest in hardware and electricity to get rewards from their activity. This encourages the miners to sell the currency to reach their break even point - Cold storage
Compared to PoS there is no need to use a wallet which is connected to the internet. You can just create your addresses offline and send your coins to it.
What are the advantages Proof of Stake?
- Eco friendly
This is the main advantage of Proof of Stake. You don't need computation power to achieve consensus. Bitcoin's estimated annual energy consumption is about 60 TWh for 2018 according to this site.
https://digiconomist.net/bitcoin-energy-consumption - Interests
Everyone holding DeepOnion can receive staking rewards based on their amount. Stakers will receive about 10% in the first year, 5% in the second year and afterwards 1% per year when they help to secure the network and have a running and staking wallet. - Demand
Other to PoW you are required to have coins to get rewards from mining and therefore this contributes to a higher demand of the coin.
What are the advantages of a Hybrid?
There is one major disadvantage of PoS coins. On a hard fork you can easily mine both forks without any additional effort. If you want to mine both forks in a PoW coin, you would need more hashing power to achieve it.
Summarized I would say DeepOnion made the right choice with its hybrid coin. They have the advantages of a PoS coin and the backup of the PoW miners. They can motivate miners to upgrade to the newer consensus rules, prevent 51% attacks and have an eco-friendly coin.
I hope I have covered the most important points on this topic. If you have any additions or comments, please reply to this article.
Links
DeepOnion Whitepaper: https://deeponion.org/White-Paper.pdf
Vote central: https://deeponion.org/community/threads/article-deeponions-upcoming-vote-central-where-community-matters.26150/
DeepOnion community board: https://deeponion.org/community
I published this article also on the DeepOnion community forum.
https://deeponion.org/community/threads/article-deeponion-pos-proof-of-stake-only.34540/
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