Proof of Stake — Is it the future?
With the recent battle in the crypto space between bitcoin and bitcoin cash, proof of stake has emerged from the shadows. This is all due to the fact that miners have now been shown to possess a lot of power. So much for a decentralized economy, right?
Let’s break this down:
Proof of Work:
A proof-of-work (POW) system (or protocol, or function) is an economic measure to deter denial of service attacks and other service abuses such as spam on a network by requiring some work from the service requester, usually meaning processing time by a computer. (Wikipedia, 2017)
In layman terms, by directing all the processing power of your computer towards a service, you are supporting the infrastructure of that protocol. In turn, you are rewarded by receiving block rewards.
Lots of wealthy investors saw the potential of this early on and created giant mining farms, packed full of computer processing power to capitalize on the block rewards system. Such mining farms rent their processing power out, like Genesis mining.
On top of all this, the birth of bitmain further accelerated the mining hardware in the field. Now mining farms have far more hash power than ever before.
All of this capitalization leads to monopolization. What was once decentralized is now at the mercy of the big farms. If they wish to switch to another currency, what will happen to the previous? Transactions would slow down immensely and eventually stop, it would just gather dust. There would be a mad rush to liquidate funds out of the currency, but with no miners to support this.
So what now?
Proof of Stake:
Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has. The first cryptocurrency to adopt the PoS method was Peercoin. (Investopedia, 2017)
The diagram above explains PoS quite well. One notable feature of proof of stake is its energy efficiency. Rather than have thousands of computers farming at once, all you need is one computer with your holdings on it. In the present day, environmentally friendly solutions are often favored, especially by government. Not to mention, by running only one computer how much electricity would you save? A lot.
Ethereum is looking to completely switch to PoS in the near future as they believe in its advantages, but is the technology refined enough to be introduced just yet?
Cardano is a decentralised public blockchain and cryptocurrency project and is fully open source. Cardano is developing a smart contract platform which seeks to deliver more advanced features than any protocol previously developed. It is the first blockchain platform to evolve out of a scientific philosophy and a research-first driven approach. The development team consists of a large global collective of expert engineers and researchers (Cardanohub.org, 2017).
They have worked hard alongside Prof Aggelos Kiayias, previously the Chair in Cyber Security and Privacy at the University of Edinburgh, to create the first provably secure proof of stake protocol, Ouroboros.
Cardano uses a new proof of stake algorithm called Ouroboros, which determines how individual nodes reach consensus about the network. The algorithm is a crucial part of the infrastructure that supports the Ada cryptocurrency and is a major innovation in blockchain technology. Ouroboros eliminates the need for an energy-hungry proof of work protocol, which stands as a barrier to blockchain scaling up for much wider use. Designed a team led by IOHK Chief Scientist, Professor Aggelos Kiayias, Ouroboros is the first proof of stake protocol that has mathematically been shown to be provably secure, and the first to have gone through peer review through its acceptance to Crypto 2017, the leading cryptography conference. The level of security demonstrated by Ouroboros compares to that of Bitcoin’s blockchain, which has never been compromised. (Cardanohub.org, 2017)
They are the first company to provide a suitable substitution for the current state of the blockchain. Through a legitimate peer-reviewed process, Cardano has opened up the doors to the next generation of blockchain technologies.
In the future, when banks and governments look for the best PoS protocol to adopt, they are going to choose the most reliable, researched and well developed technology
However, Ethereum has also been working hard to get their PoS protocol, Casper, out into the blockchain too. According to the implementation guide, Ethereum plans to release a hybrid version of Casper. It will merge with the previous PoW protocol but over time, take over completely. Though, it is known that Vlad Zamfir (Co-developer at Ethereum) has a far more revolutionary, theoretical PoS protocol but it has been decided to go ahead with Vitalik’s version to ensure it gets out the door.
Cardano has also managed to design a multi-currency wallet, Daedalus. Daedalus is currently the only wallet able to store ADA (Cardano’s currency). They have plans to add more currencies to the wallet in future, allowing for the system to be inter-operable with other blockchains.
- Designed to work with plugins of any sort that future developers wish to use.
- You are in control of your money and hold your keys.
- Hierarchical deterministic (HD) wallet implementation, will allow the management and organisation of multiple wallets at once.
- Backup/recovery features, if needed.
- Custom themes and user friendly design plugins.
- Available for Windows, Mac and Linux.
More information about Daedalus and where you can download it can be found here.
My 2 cents:
It is far too early make calls on which blockchain will be mainstream in the next 5 years, but Cardano sure has the necessary requirements to do so. Soon, blockchains will be available for study at universities and jobs will open up to maintain them. Cardano has already claimed the academic territory that very few blockchain companies have touched. I believe it is only a matter of time before Cardano becomes mainstream and achieves what it set out to do:
Become a technological platform that will be capable of running financial applications currently used every day by individuals, organisations and governments all around the world. The power to bundle a payment system, property rights, identity, credit and risk protection into a single application running on a cell phone or computer is not just useful, it is life changing. The reason we are building Cardano is that we feel we have a legitimate shot at delivering — or at least advancing — this vision for the developing world (whycardano.com, 2017).
Thanks for reading, and as always
ADA Address: DdzFFzCqrhsh1HLtVZXsQDHCkPkgWmdFCKYji5Ysjgmr8CeMJiQnv7qZ9nrFftcbYEBNmGG79xKayoVAdvh7cdiTMNzNhbmeX4vidGr9