Recently, perhaps crypto currency watchers often hear about the ideas of Proof of Work and Proof of Stake, as well as the definition of mining, or the process of how new digital currencies are released through networks.
Proof of Work
As considered the first consensus algorithm, Proof of Work (PoW) is defined as a protocol that has the main purpose of preventing cyber attacks such as distributed denial-of-service (DDoS) attacks, which aim to use up computer system resources by sending fake requests.
The concept of Proof of work already existed even before bitcoin, but Satoshi Nakamoto applied this technique to - we still don't know who Nakamoto really is - his digital currency that revolutionized traditional transaction methods.
In fact, the idea of the PoW was originally published by Cynthia Dwork and Moni Naor in 1993, but the term "Proof-of-Work" was created by Markus Jakobsson and Ari Juels in a document published in 1999.
However, taking into account the date it was made, POW is probably the biggest idea behind Nakamoto's Bitcoin white paper - published in 2008 - because it allows consensus without trust and distribution.
Proof-of-Work which is performed through mining and used by Bitcoin, Litecoin and Dogecoin among others. The miner is incentivized because it receives a reward for solving the puzzle that verifies the transaction. The quantity and quality of the computer determine the mining power and consequently the profit you can make. PoW reaches consensus because the miner has to (literally) prove the verification through computational labor, and at least 51% of the miner-network has to agree with the verification.
Proof of Stake
Proof of Stake (PoS) as the second consensus algorithm, is another way to validate transactions based on distributed consensus, and to achieve distributed consensus. This is still an algorithm, and the goal is the same as proof-of-work, but the process for achieving goals is very different.
The idea of proof-of-work was first proposed at the BitCointalk forum in 2011, but the first digital currency to use this method was Peercoin in 2012, along with ShadowCash, Nxt, BlackCoin, NuShares / NuBits, Qora, and Nav Coin.
Unlike proof-of-work, where the algorithm rewards miners who solve mathematical equations with the aim of validating transactions and creating new blocks, with proof-of-stake, the creator of the new block is chosen in a deterministic way, depending on wealth, or defined as well as a bet. There are no block rewards.
This PoS selects a validator (comparable to a miner) based on the number of coins it deposits. Since one validator verifies the transaction, the miner doesn’t need to waste as much energy and hardware as Proof-of-Work – where each miner tries to solve the same transaction.
In addition, all digital currencies were made beforehand and the numbers never changed. This means, in the PoS system, there are no block rewards. So, the miners take transaction fees.
However, the rich get richer as they have higher chances at the selection procedure, meaning higher chances to receive the reward. This is why, in fact, in this PoS system, miners are referred to as counterfeiters. PoS is implemented by Peercoin, Decred, and Ethereum. This verification scheme reaches consensus because the validator-network checks the reviews as well. The validator won’t verify fraudulent transactions because it will lose more money (the deposit) than it can earn (the reward).
Proof of Transaction Proposed by TAU Coin
Cited from http://networkcultures.org/longform/2018/08/25/proof-of-transaction-the-materiality-of-cryptocurrency/ ,
Proof-of-Transaction is defined as "a physical object that absorbs the process of transferring value from one space or entity to another. It captures the orders of magnitude of the exchange (from technology to phenomena) and narrates these realities through interobjective relations". Further, it is explained that transaction contains a meaning of ‘an agreement’ which involves an exchange or interaction between two entities. While other word that is ‘proof’ shall be referred to ‘evidence’, the witness of an event.
The proposal of TAU is an original consensus mechanism POT. It uses on-chain historical accumulated transactions to determine who can propose a new block. Block generation in TAU is still called mining like Bitcoin, but block reward only comes in the form of transaction fee. TAU is a single utility chain that funds wiring is the only thing supported; therefore, transaction fee is the only income for miners. TAU block structure is designed to support mobile phone mining for decentralization. Total 10 billions coins are generated in the genesis block, while the goal is for each individual to have a full TAU. For every address, the probability of generating a new block is exactly in linear proportion to its historical transaction. This sum is called mining power, an analogue to hash power in Bitcoin.
Further information can be found at www.taucoin.io.
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