POA, POB, POC, POD, POE, POI, POP, POS, POW, POST dPoW and dPoS explained


Welcome to Crypto Jargon – the series where I break down the complex terms
used in reference to cryptocurrencies
and blockchain tech.
In this episode of Crypto Jargon
we take a closer look at the following terms.
These are all in relation to cryptocurrencies, of course,
These are all different types of proof so let’s get started.
This episode is sponsored by Ledger:
Maker of the best Hardware wallets on
the market to find out more about it,
check out the description of the video,
where you will find the link and my
tutorials on the Ledger Nano S and Nano X devices
I will start with the most
commonly used ones I won’t be following
the alphabetical order so let’s begin
with POW which stands for Proof-of-work
This is related to mining so, if you
need more clarity about what the Mining
process is and how it works check out
the previous episode where I explain it in more detail.
Proof-of-work is a consensus algorithm
pioneered by
Satoshi Nakamoto (the creator of Bitcoin),
that ties mining capability to computational power.
Blocks must be hashed, which in
itself is an easy computational process
but an additional variable is added to
the hashing process to make it harder.
So, when a block is successfully hashed, the hashing must have taken some time
and computational effort. Thus, a hash block is considered proof of work.
The rewards for this type of mining are
straightforward:
miners receive coins and transaction fee
rewards in direct correlation to the
actual mining work they complete and
this is why it’s called proof of work.
This type of mining is very high energy-consuming and it’s often criticized as
one of the main downsides to bitcoins
production for instance.
The next most frequently used acronym is POS which is Proof of Stake.
This is a consensus distribution algorithm that rewards earnings
based on the number of coins that a user owns.
Holding any number of
units of that cryptocurrency for a
usually, fixed period of time is called
“staking” and it’s used to calculate the
amount of that currency that you mine.
Proof-of-Stake is incentivizing users to
hold on their coins which in return
reduces the available volume on the
market and ultimately aims at preventing
deflationary effect on that currency.
The dividends paid out to the stakeholders are proportionate to the amount they stake,
meaning that the more they stake
the larger their earnings will be over time.
Proof-of-stake was first
implemented by Peercoin as an
environmentally friendly approach to
mining and in 2019 the second-largest
cryptocurrency by Market Cap Etherium
switched from Proof-of-work to a
Proof-of-stake algorithm.
In regards to the
amount of transactions per second.
Proof of Stake blockchains
usually, present a better performance
than Bitcoin for instance. However, the
difference is not that significant and
Proof of Stake networks did not really
manage to solve the scalability problem.
Another alternative is Proof-of-Stake-and-Trust which is a consensus mechanism
used by Waltonchain- a project which
focuses on cross-chain technologies.
Their hybrid consensus mechanism rewards token holders and nodes with dividends,
but it also adds a node reputation mechanism to further reward higher
quality performance and more honest
nodes.
There’s also dPoS, which stands for
Delegated Proof-of-Stake.
(another variation of Proof-of-Stake) it’s also a type of mechanism used to achieve
consensus and it was developed by Daniel Larimer – American software developer
and the founder of Bitshares, Steemit and
EOS.
Delegated Proof of Stake is designed as an implementation of
technology-based democracy using voting and election.
The users vote for
“delegates”, who in turn, produce the blocks
on the relevant blockchain.
The first implementation of DPoS was executed on
Bitshares and it is also considered to
be more secure than the regular
Proof-of-Stake consensus, which is not very well protected from malicious
intentions of stakeholders.
Another hybrid approach is the Delayed Proof of Work.
a consensus mechanism used by the cryptocurrency Komodo.
Delayed Proof of Work allows one blockchain to take advantage of the security and hashing
power of another blockchain (which in
Komodo’s case is that of Bitcoin).
Now, moving on to POC, which is Proof-of-Capacity which is also known as PoSpace,
Proof-of-Space. A means of showing that
one has legitimate interest in a service
by allocating a non-trivial amount of
memory or disk space to solve a
challenge presented by the service
provider.
Proofs-of-Space are very similar to Proofs-of-work,
except that instead of computation – storage or disk space is being used.
POA stands for Proof-of-Authority. It’s a method used to
achieve consensus on the blockchain
similar to Proof-of-Stake.
When the blockchain achieves consensus through Proof-of-Authority,
It uses identity as a stake.
Now, POB is Proof-of-Burn. Well,
there is more than one version of Proof-of-Burn,
Firstly, it is a method used to
achieve consensus on the blockchain
Proof-of-Burn looks like a Proof of Work
algorithm but with reduced rates of
energy consumption. The block validation
process of Proof of plan-based networks
does not require powerful computational
resources and a lot of energy and it
does not depend on powerful mining
hardware.
In Proof-of-Burn users must show
proof that they burnt a certain amount of coins in order to demonstrate
their commitment to the network,
gaining the right to “mine” and validate transactions.
Since the process of
burning coins represents virtual mining power,
The more coins a user burns in
favor of the system the more mining power
they have and thus, the higher the
chances to be chosen as the next block validator.
Because proof-of-burn transactions are
recorded on the blockchain there is
enough necessary proof that the coins
can no longer be used and the user can
be rewarded as a result.
Another use of the term Proof-of-Burn is in relation to Token burns
which is a method used by some developers
in order to create scarcity to reduce the total supply of
their tokens which in return should
increase the value of these tokens.
I talked more about this in the next
Crypto Jargon Episode, so make sure you
check this out. Make sure you’re
subscribed and you hit the notification bell
so you don’t miss it out.
Moving on to Proof-of-Developer.
This is literally as it sounds:
proof that a specific developer exists.
Why this is needed? – you might ask.. Well, it makes it less likely that an anonymous
developer will go on the ground after
having fraudulently raised capital
(which has happened in the past on a number of
occasions).
Developers are the brains behind any cryptocurrency and their involvement and consistency
in the project is of utmost importance for
the stability and the long term
existence of the earth cryptocurrency.
This type of proof takes inspiration
from the pre-digital era, when people had
to pose with the most recent newspaper
issue in order to provide “Proof of Life”
but now this is done with the help of blockchain technology.
Most famous use case to date is that of Vitalik Buterin,
founder of Etherium posting this tweet
in 2017 after a fake article claimed
that he had passed away.
So yeah, Proof-of-Developer is really a thing.
Next is Proof-of-Existence, which sounds similar but it refers to pretty much anything
including intellectual property,
documents, pictures and any other digitally stored data.
It’s a service provided through the blockchain
that allows people to prove
that something existed at a certain
point in time and demonstrate their
ownership of it.
POI is Proof-of-Importance.
Now, this is also a consensus algorithm similar to Proof of Stake and
it was introduced by NEM, a popular
cryptocurrency.
Nodes vest currency to be eligible for creating blocks
and in that regard is similar to Proof of Stake
but it also differs in the way that it
rewards users.
PoP is Proof-of-Provenance.
It’s a consensus mechanism used by the
DigixDAO (DGX) cryptocurrency project, to
track the movements of physical assets,
identify their ownership and ensure
their security.
Well, this is everything for today’s video.
These are all of the proof that I managed to squeeze into this episode.
I hope I didn’t miss any.
but with time
I’m sure there will be more popping up.
So I won’t be surprised if I need to do a second part of this later on in the future.
If you like this
episode, share it with someone else who
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I’d love to hear from you. Thanks for
watching and I’ll see you in the next
episode of Crypto Jargon. Watch this
space.
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