Is it a revolution? Or just hype? Perhaps something in between? One thing is clear, Blockchain is one of today’s big talking points. Experts see a technology that will influence our life, a new phase of the internet. But what is the belief based on?
Cryptography lets us prove things without assumptions about behavior.
Cryptoeconomics lets us prove things with minimal assumptions about participants.
Both are idea for decentralized / trust-minimized systems.
In this brief video, Vitalik Buterin describes the difference between proof of work and proof of stake and why he considers proof of stake to be a more efficient consensus mechanism.
Proof of stake is a type of algorithm by which a blockchain network aims to achieve distributed consensus. In proof of stake, the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e., the stake).
Proof-of-work uses mining; which requires solving computationally intensive puzzles to validate transactions and create new blocks. This uses a tremendous amount of energy.
Proof of stake requires much less energy consumption.
Consensus is fundamental to a blockchain. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority.
Consensus algorithms are in continual development to increase performance and efficiency.
Vitalik Buterin is a Russian-Canadian programmer and writer primarily known as a co-founder of Ethereum and as a co-founder of Bitcoin Magazine.
A proof of work is a math verification system by which it’s costly and time-consuming to produce data, but it’s easy for others to verify that the data is correct.
Proof of work (PoW) was originally invented for computer security and as a defense against email spam. Later on it was adapted for use with cryptocurrency, most famously with Bitcoin.
Information is stored in continuously created blocks of data (blockchain) that needs to be updated and verified by decentralized participants on an ongoing basis to maintain the integrity of the system.
This system is how participants (miners) work to independently try to find the next data block (answer to the math problem). Once that’s accomplished the solution is made available throughout the network, which then verifies that it’s correct. It takes a lot of computational power to solve the math problem, or puzzle, but once it’s solved, it can be quickly verified by others.
The computational intensity consumes a lot of energy, but it’s a workable verification process and is the basis for immutable distribution, which not only establishes uncensorable money flows, but the foundation for a new paradigm of economic organization.
Stated another way, proof of work is a bridge between digital information and the physical world.