Unlocking The Crypto Puzzle-Part 9 — Proof of Work / Proof of Stake / Proof of Trust
Proof of Work… Proof of Stake… Proof of Trust. Year after year, Technology keeps advancing at an astounding rate. In 2009, we all thought Satoshi Nakamoto was a genius to apply Proof of Work (POW) to his Bitcoin Blockchain. Yet as the years went by, we began to see the limitations of POW in terms of cost and scalability.
Many set their sights on Proof of Stake (POS) as a viable alternative. It requires less energy to run the algorithms, which in turn means less cost passed down in transaction fees. It is also much faster. But it too has its critics, who point to the favored status of those with larger stakes, and the theoretical potential for 51% attacks, which could conceivably destroy a networks decentralization.
In the first episode of this series, “Proof of…” , we talked about POW and the pros and cons of its use in blockchains. In the second episode, we discussed POS, and whether its potential improvements on the problems associated with POW would allow it to eventually replace POW as the technology of choice in blockchains.
PART 3: PROOF OF TRUST
In this episode, we are going to complete the Proof of… trilogy by exploring Proof of Trust (POT). Recently COTI (an acronym which stands for Currency Of The Internet) announced that its new cryptocurrency transaction system has passed from the Testnet phase, which began in early 2019, and has successfully created and launched the Alpha version of its DAG blockchain, known as the “Trustchain.”
The Trustchain features a unique Proof of Trust Algorithm and a Consensus Algorithm, combined with its Double Spend Protection (DSP) and buyer-seller protections that combine legacy and blockchain elements to form a truly modern payment solution.
In simple terms, the Proof of Trust and Consensus Algorithms create a decentralized network, the Trustchain, and allows it to operate incredibly fast and at an extremely low cost.
Its Trustchain protocol offers a unique solution for several of the most worrisome blockchain issues, such as scalability and transaction fees.
In previous episodes, we’ve discussed the growth of the validation concepts POW and POS. While each seemed like solid operational options when they were introduced, time and growth proved the limitations of both of these as long-term validation vehicles. Whether it was POW’s high cost and staggering energy use once popularity caused it to scale, or POS’s problem with a validation system that rewarded the depth of investment into the system (those with a huge stake have a big advantage), both systems started with admirable goals and strong potential.
What neither of these systems successfully addressed was the emerging trend to solve the issue of using cryptocurrency as a large-scale payment system. Around this same time, industry developed the use of innovative data structures that offered unique variations on traditional models. It was in this environment that Directed Acyclic Graphs (DAG) were born.
COTI emerged with their blockchain POT system to specifically address the payment needs (scalability, speed & low fees/costs) that were previous unanswered by the existing blockchain structures.
COTI’s answer was a well-built POT blockchain consensus that embraced individual user Trust Scores, and was driven by smart contracts. Built on a stunningly innovative DAG data structure, it is capable of the flexibility and speed necessary to take blockchain transactions into the realm of mainstream acceptance.
In fact, a DAG is not actually a blockchain. It is blockchain-like in that it can fulfil all of the functions of a traditional cryptocurrency blockchain. It just does it better… about one hundred thousand times a second better.
Rather than the linear growth pattern of a blockchain, where one block is built and then it helps form the block that follows, a DAG allows the creation of numerous nodes, or blocks by way of comparison, simultaneously. And unlike the Bitcoin blockchain, the more nodes or blocks there are, the faster the system gets. I will go into the specific details of how a DAG functions within the cryptocurrency environment in the next chapter of Unlocking The Crypto Puzzle.
At the heart of the Trustchain concept is a rating system called the Trust Score. User Trust Scores determine how quickly they can confirm a transaction. So, the more you are engaged within the Trustchain, the higher your rating will be — and your level of participation will be rewarded by more use within the system. For example, higher Trust scores that are rewarded with lower fees and a higher priority for their transactions.
As impressive as the Trustchain + DAG concept is, the most impressive part of the platform is the wide array of uses for the system. Enterprises, decentralized payment networks, merchants, stable coins, developers and many more applications can take advantage of the Trustchain system for rapid scalability.
Proof of Trust currently seems to offer the best-case solution to cryptocurrency’s need for scalability and speed. By utilizing a user’s history on a network to ascertain value based upon participation on the network, and by alternatively “losing trust” when a user tries to defraud the system, they are in effect creating a proof of stake type system where trust is staked instead of wealth. Combining this concept with a new type of blockchain that rewards growth by providing even greater speed and flexibility, it seems like cryptocurrency may have finally found a solid vehicle for its growth into mainstream financial transaction acceptance.
