A good number of individuals in today’s date have analysed the nitty-gritties of cryptography-backed virtual currency, otherwise known as “cryptocurrency”, say for example, Bitcoin. One definitely realizes that these keep running on a decentralized ledger known as the blockchain. But many are still confounded by a simple question concerning digital currency which still remains unanswered: How is the value derived? It might appear to be a strange idea, yet, like any type of trade agreement or exchange in the past, the value is typically based on a consensus – or an understanding by all the parties who are involved, that this “digital currency” embodies a financial value. With respect to cryptocurrencies, such an agreement depends on an unquestionable set of standards known as “consensus algorithm”, that decides on the total number of coins to be created and significantly enough, how these will be created or mined. A wide range of algorithms exist with regards to digital currencies which fluctuate marginally, starting with one computerized coin onto the next, nonetheless, all except one can be categorized as one of the 3 protocols:
• Proof-of-Work- It was the first mining algorithm created with Bitcoin (BTC). Proof-of-Work(PoW) blockchains work by compensating miners for utilizing computational energy to solve complex equations. The more computing power one has, more are the chances of creating the subsequent block and earning the block reward. The difficulty level of the calculations that need to be solved increases after some time, thus, to carry on with the process without any form of hindrance, miners should keep on updating the equipment and utilize more power to fuel it. This very factor has encouraged the construction of gigantic mining “farms” that give an upper hand to regular users, thus reducing the general decentralization of the record.
• Proof-of-Stake- It was a true endeavour to offer an alternative choice for the pervasive PoW algorithm and ideally re-make the popular cryptographic protocol. In Proof-of-Stake currency, the block rewards are conveyed to clients for “staking” or holding the coins in their open wallets. With this new protocol, the problem of excessive energy consumption was solved to a certain extent, but the issue of unreasonable benefit still remained. The clients with the biggest stake receive far more benefits and this calls for the need to have the money needed to purchase a large amount of Proof-of-Stake currency to stake it in the first place. At the same time, there are evident security issues with having your wallets online and open 24/7.
• Proof-of-activity- As an algorithm, it isn’t really novel and combines the features of the above 2 in different ways based how the same is actualized. This paves the way for approaching cryptocurrency mining, but is somehow incapable of correcting or addressing a few issues that are a part and parcel of the 2 algorithms. Power consumption charges are comparatively high and unjustified benefits or chances of fraud continue to exist.
Now, let us come back to the topic of value. We are able to comprehend that the features of a given currency, including the mining algorithms, will create real-world interest depending on the advantages of maintaining a ledger, convenience of the currency and its usability, along with the different other features, for example, security and protection. As more individuals are pulled in to a specific currency, the consensus grows stronger with respect to its value and the system turns out to be more secure and decentralized. So imagine a scenario in which I let you know there was a fourth convention for mining. One that isn’t just novel in its approach yet in addition takes care of the innate issues of the PoW and PoS frameworks, in this way opening the system up to numerous more people at the same rate of profit-per-dollar. Indeed, it is none but Proof-of-Capacity.
The Proof-of-Capacity was first introduced with a currency named “Burstcoin” in August, 2014. Till date, Burst is the only currency to have implemented PoC, making it an extremely novel platform. This implies that Proof-of-Capacity is eco-proficient as well as libertarian by nature, particularly when contrasted with the aforementioned protocols. These 2 features alone take care of the most important issues of the popular cryptocurrencies. But in any case, Proof-of- Capacity solves another big issue- that of scalability.
The true potential of Proof-of-Capacity is yet to be fully explored and it continues to remain underutilized. It may take some time before it is completely perceived for its advantages and is applied in newer coins or utilized as an update for older coins such as Ethereum and Bitcoin. A definitive reason behind the development of digital currency is creating a decentralized platform which can be globally utilized and can easily substitute the traditional financial frameworks in a safe, self-governing, and shared way. Proof-of-Capacity demonstrates incredible potential to achieve that objective. Additionally, it requires about 30 times less energy than the ASIC-power Proof-of-Work mining. Being an energy-efficient protocol, it isn’t difficult to envision how this approach could change the outlook towards cryptocurrencies!
Only time will tell if this adoption is rendered possible. The best approach at the moment would be to opt for cryptocurrency cloud mining that is carried out in a mining data center. These data centers house powerful mining rigs and mine multiple currencies at a time. As a client, you neither need to purchase specialized mining hardware, nor spend a lump sum amount on electricity.