The most efficient consensus model

I will compare the two most used consensus models in the world of cryptoeconomics, Proof of Stake (PoS) and Proof of Work (PoW).

Where the first one is based on the economics of its coins (native tokens), and the second one goes for computing power and energy.

In terms of energy consumption, currently mining 1 bitcoin is equivalent to a consumption of 200 kWh (that is enough to supply a house for four weeks), and the annual consumption is around 21.59 TWh.

A Visa transaction has an estimated consumption of 0.01 kWh, which is 20,000 times less energy consumption.

Bitcoin consumption is comparable to the annual electricity consumption of a country like Ecuador.

For its part, Cardano’s network for all its transactions records in a year the consumption of a house.

Bitcoin uses the mining power model, where mining nodes compete with hash power to mine a block and thus obtain profits with the new coins minted, plus the transaction fees of that block. The winner takes all.

Cardano is developed in a friendlier model, with a focus on the choice of its community, where stake pools compete to forge new blocks based on the amount of their pledge and the amount of staking received from ADA holders.

While PoW has as its great strength the security of its computational power, PoS must be more complex in its algorithmic design to achieve it. The parameters that regulate the consensus (k; a0, p, t, d, among many others), require a rigorous calculation, and dynamic adjustments over time.

Thus, the PoS is a consensus based on voting, since the coin holders delegate their participation in the validators for the election of nodes, and then the competition between validators is generated to be elected (slot leader) by the protocol (Ouroboros) to sign blocks.

The PoW is incompetent to scale large numbers of transactions, as required in blockchains running DeFi and DApp.

Practical example of this is Ethereum, which is developing its (complex) migration from its current PoW to PoS.

Ethereum miners naturally prioritize transactions with the highest gas prices, as they are the most profitable to them.

Ethereum can only process a few hundred transactions (on average) per block, and there will continue to be high fees as long as DeFi and DApp usage continues to increase. Gas prices will remain high as long as there is strong competition for blockchain space.

It is clear that the essence of the PoW consensus is competition for who is first to mine the block (higher hash power) and so they choose to process the highest fees first, as a matter of profitability. It is a price race. Fee inflation.

Has Cardano chosen the most efficient consensus model for its blockchain?

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