A new proposed mining algorithm, Proof of Transfer (or PoX), intends to become a key tool in achieving a user-owned Internet and the promise of a secure Web 3.0.
Decentralized IT network based in New York Blockstack PBC unveiled the mining algorithm to anchor its network to the Bitcoin blockchain – a list of records called blocks, linked using cryptography. Blockstack’s network allows developers to build apps that give users control over their personal data. The framework supports over 400 decentralized applications, including solutions for blogging, fundraising, and creative collaboration.
If adopted as part of new blockchain proposals including Batteries 2.0, expected later this year, Blockstack would combine proof of transfer with Bitcoin to provide new possibilities for developers to create a user-owned internet.
The Stacks 1.0 blockchain works like a “virtual blockchain” on top of Bitcoin. Every transaction in the Stacks 1.0 chain is also a Bitcoin transaction. All data of a Stacks transaction is encoded in the metadata of a Bitcoin transaction.
The mining mechanisms used by these algorithms are divided into proof of work (nodes dedicate compute resources) and proof of stake (nodes dedicate financial resources).
The intention behind proof of work and proof of stake is to make it virtually impossible for a single malicious actor to have enough computing power or stake to attack the network.
With proof of work, a miner performs “work” that consumes electricity and is rewarded with digital currency. The miner theoretically converts electricity and computing power into the new digital currency. Bitcoin is an example of this PoW blockchain.
With proof of stake, minors stake their holdings in a new digital currency to participate in the consensus algorithm and bad behavior can be penalized by “slashing” the miner’s funds.
Proof of Transfer is offered as part of Blockstack’s Stacks 2.0 blockchain, which is slated to launch in Q2 2020. Proof of Transfer generalizes the concept of proof of burn.
It uses proof-of-work cryptocurrency from an established blockchain to secure a new blockchain. However, unlike proof of burning, rather than burning cryptocurrency, miners transfer the committed cryptocurrency to other network participants.
Developers could use proof of transfer to launch new blockchains anchored in the security of Bitcoin.
PoX can incentivize earning Bitcoin rewards for participants of new blockchains, which can potentially be used for use cases such as consensus participation, ecosystem development funds, and incentives for specific users.
To participate in the leader election process to mine a new block and earn tokens on the Stacks blockchain, PoX requires miners to pledge Bitcoin (BTC) as a replacement for native proof of work.
PoX allows network participants to earn BTC rewards by actively participating in the consensus algorithm.
Consensus algorithms for public blockchains require computer or financial resources to secure the state of the blockchain. Minors process and secure every block transaction on the blockchain.
In 2019, Blockstack became the first company in the United States to receive SEC qualification for its digital token offering. The company is funded by Union Square Ventures, Y Combinator, Lux Capital, Digital Currency Group, Naval Ravikant and others.
Blockstack PBC CEO Muneeb Ali said:
“Bitcoin is already the king of Proof of Work (PoW), so by expanding access and creating new ways to leverage the security and trust of the Bitcoin network, we are enabling the fundamentals of an Internet owned by the user.In other words, proof of transfer allows anyone to benefit from the security of Bitcoin without needing to modify Bitcoin.
More and more companies are developing blockchain solutions to enable safe and secure transactions that scale and are recorded on the “open distributed ledger“Without the need for a central server. Blockchain solutions will help the adoption of cryptocurrency for consumer goods and services and help us all in our peer-to-peer transactions.
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