Proof of Work vs Proof of Stake vs Proof of Importance - Blockchain
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Proof of Work vs Proof of Stake vs Proof of Importance - Blockchain

By Gopherine | gopherine | 2 Mar 2020


Cryptocurrencies are based on the decentralized database based upon consensus mechanism or in other words distributed ledger. Any data stored in this network are immutable(cannot be changed or deleted) as it is stored in different locations, without any central authority. The unavailability of central authority makes it more secure, Since every transaction is verified on every node connected to the network and a transaction is only valid when more than 50 percent of the network legitimizes it. For every transaction, a new block is created in the network, wherein each block contains information on the transaction. Every new block added to the blockchain must be verified via mining.

 

The inception - Proof of Work (PoW)

Mining

 

In the blockchain network, you have multiple nodes having the same state. And any new block added in this blockchain must be verified. For this verification, miners are given certain mathematical calculations for which must be solved and whoever solves this puzzle they receive a reward (btc, bsv, bch etc). And once the miner is able to solve this puzzle they can add this block in the blockchain. Every time you make a change in a blockchain this process needs to be repeated, this process of mining is quite slow and also consumes lots of resources both hardware and electricity. There are also dedicated mines available to mine these also PoW is prone to the so-called 51 percent attack. Which even though people keep claiming is not going to happen but note it is not impossible and thus this can happen. This is in general also true for the blockchain network who are based on other concepts that is the reason few of the blockchain networks own 51 percent of the nodes making it more centralized than decentralized however this is a trade-off between decentralization and security and now SECURITY HERE IS SUBJECTIVE ( :P  who knows they shut down those 51 percent nodes ).

e.g.: Bitcoin, LiteCoin, BitcoinSV  etc 

 

The Endeavor - Proof of Stake (PoS)

Stake

Proof of stake is an evolved idea on the concept of mining making it easier and faster to mine with low use of resources. So, in here any person can mine coin by validating block of transactions. This depends on the staking concept basically based on how many coins you hold the profit is based on that. So the more coins you have the more say you have to invalidate any transaction. This concept has a problem where richer gets richer. Social setting hits the blockchain network (;-;) and here we thought we will get rich. Yet this is way better than the PoW as it's more eco-friendly, cheap and fast most of the new blockchains or utility token are based on PoS.

e.g.: Ethereum, Tron, Stellar, Ripple, etc.

 

The Termination - Proof of Importance ( PoI)

importance

As we can see that there is still some bias on how mining works with the above and if we are so fascinated about decentralized ecosystem something which cannot be promoted is any organization taking over mining so much so that rest of the individuals don't get the equal opportunity which is unfair in a decentralized approach. And this problem is pretty much addressed by NEM.

NEM’s consensus is built on a unique Proof of Importance algorithm, using a technique similar to Google’s PageRank to prevent a variety of attacks on the trustworthiness of blockchain transactions. It serves the same purpose as typical Proof of Work (PoW) mechanisms used by Bitcoin and others, but is much more scalable and energy efficient. This allows nodes to run on almost any hardware while still providing an absolutely secure network that can scale without limit. - https://nem.io/technology/

That's how NEM defines it sounds pretty similar to others so lets deep dive a little. So NEM requires that you hodl at least 10,000 vested XEM to harvest (mine) XEM. 

"Vested" means the XEM have stayed in your account for a certain number of days. Every day 10% of your UNVESTED coins become vested. This means an account with 20,000 XEM will take about a week to accumulate the 10,000 vested XEM needed for harvesting. -https://docs.nem.io/en/nanowallet/delegated-harvesting

For harvesting, a transaction fee is charged for a block and you can earn only transaction fee using harvesting. Any account with a higher importance score is given priority to harvest coins. This comes with all the similar advantages of proof of stake. However, making it cheaper and more aligned to the idea of decentralization.

 

Personally i like how proof of importance works what about you do comment and tell me and give it a like if you like this post :) till next time adios !!!!!!!!


Gopherine
Gopherine

Blockchain Freak and Developer


gopherine
gopherine

My views on several cryptocurrencies and the market. Nothing that I post is a market advice, so make your decisions at your own risk.

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