Blockchain Consensus: The Past, Present, and Future
What comes after Proof of Work?
Since the creation of Bitcoin by Satoshi Nakamoto in 2009, Bitcoin has transformed how the world thinks about money, privacy, contracts, and more.
Launched as an experimental, decentralized form of money, Bitcoin has been instrumental in providing a foundation for innovation and has inspired today’s smartest minds to continue improving upon the revolutionary applications of cryptocurrency and the Blockchain.
While Bitcoin is undoubtedly the most popular cryptocurrency in circulation today, it unfortunately faces several significant challenges that potentially prevent Bitcoin from being adopted and used mainstream — often called the scalability trilemma.
Despite its original intention, Bitcoin is far from decentralized and is both expensive and slow compared to other alternatives within the crypto community.
Just as the first few web browsers such as Netscape paved the way for making the World Wide Web a global phenomenon, Bitcoin’s impact should indeed be acknowledged. But the case can be made that a handful of crypto startups and cryptocurrencies are close to cracking the code of making crypto trusted, scalable, and less expensive worldwide.
The Case Against Proof of Work
With Bitcoin currently operating under a proof of work model, the entire Bitcoin blockchain is dependent on miners around the world to ensure the network is running.
While the current Bitcoin protocol incentivizes miners to act in good faith, the reality is, with three mining companies essentially controlling the Blockchain, Bitcoin is far from decentralized. Currently, the top mining operations such as BitMain, F2Pool, and Slush make up just shy of 50% of the Bitcoin network.
If several companies were to reach the 51% mark of hash power, they would theoretically have control of the Blockchain. A recent 51% attack recently occurred for the cryptocurrency Bitcoin Cash which has created a whole host of issues.
Additionally, because the mining model requires a significant amount of electrical resources and power, Bitcoin is extraordinarily expensive. Though everyday investors can purchase Bitcoin easily, the miners of Bitcoin retain control of Bitcoin’s future.
The Future Is Proof of Stake
Since Bitcoin’s inception, hundreds of cryptocurrencies have been created, many of which are based on the original Bitcoin code. At the time of this writing, CoinMarketcap lists over 2,000 cryptocurrencies — yet none of them have surpassed BTC.
However, many cryptocurrencies have worked to solve some of Bitcoin’s most pressing issues such as scalability, decentralization, and lack of transaction speed, using Proof of Stake instead of Proof of Work.
Proof of Stake is an alternative method of validating the Blockchain that is often less computationally demanding, faster, and cheaper compared to the traditional mining model.
Proof-of-Stake (PoS for short) was created by Sunning King and Nadal in 2012 and is currently being explored by Ethereum, the world’s second most popular cryptocurrency, and is already used by other leading cryptocurrencies such as Cardano and DASH.
With ETH’s PoS code likely to be implemented by June 30th in 2019, many other cryptocurrencies and startups like Algorand are getting ahead of the PoS switchover to improve the areas in which Bitcoin is struggling.
Algorand is working to build the first scalable, secure, and decentralized digital currency and transaction platform that can be used by people all around the world regardless of location and economic status. It is a pure proof of stake protocol that is focused on several key struggles of other cryptocurrencies today.
A Boston based startup, Algorand has raised over 66 million dollars and was founded by Silvio Micali. They are currently / about to be in the process of running a Dutch auction that is both fair and balanced for those who are looking to be involved in the project long term.
One of Algorand’s current focuses is making it easier for individuals to be involved with the Blockchain without having to wait days to download all the Blockchain data.
Those who use Algorand will be given a small packet of data that is then updated to be in sync with the latest Blockchain translation. Instead of having to download the entire Blockchain the small pack of info is leveraged instead which requires less space and is significantly faster.
As Micali shared at his recent Consensus talk, “Very few people can store a terabyte of data […] if you want to maintain decentralization you must solve this problem — have efficient onboarding, efficiency growing the chain, and efficiently retrieve things in the past.“
Additionally, Algorand is looking to implement a true atomic swap model making it easy and effortless to trade two items in a trusted manner.
Current atomic swap solutions are both overly complicated and require a significant amount of tech and steps that can be removed from the process entirely.
Though a relatively new startup in the space Algorand and other cryptocurrencies such as ETH, DASH, and Cardano are continuing to innovate and push the possibilities of both crypto and the Blockchain.
While Bitcoin continues to be the most popular cryptocurrency today, it’s clear that startups around the world are not content with operating within the status quo.
