As we expected, since the publication of the Crypto trend we have received many questions from the reader. In this edition we will answer the most common. What kind of change will come that can be a modifier of the […]
As we expected, since the publication of the Crypto trend we have received many questions from the reader. In this edition we will answer the most common.
What kind of change will come that can be a modifier of the game in the Cryptocurrency sector?
One of the biggest changes that will have an impact on the world of Cryptocurrency is an alternative method of block validation called evidence of peg (post). We will try to maintain this high level explanation, but it is important to have a conceptual understanding of what the difference is and why it is a significant factor.
Remember that the underlying technology with a digital currency is called blockchain and most digital currencies currently use the validation protocol called proof of work (POW).
With traditional payment methods, you need to trust third parties, such as visas, interact, or banks, or check clearing houses to complete your transaction. This trusted entity is “centralized”, which means they keep their personal ledger that stores transaction history and balance of each account. They will show you a transaction, and you must agree that it is true, or launch a dispute. Only the parties in the transaction have ever seen.
With Bitcoin and most other digital currencies, the big book “decentralized”, which means that everyone on the network gets a copy, so no one has to trust third parties, such as the bank, because anyone can directly verify information. This verification process is called “distributed consensus.”
Pow requires that “work” is done to validate new transactions to enter blockchain. With Cryptocurrency, that validation is carried out by “miners”, which must solve complex algorithmic problems. When algorithmic problems become more complex, “miners” need a computer that is more expensive and stronger to solve problems in front of others. Computer “mining” often specializes, usually using ASIC chips (specific integrated circuits of applications), which are more proficient and faster to solve these difficult puzzles.
This is the process:
Transactions are bundled together in ‘block’.
The miners verify that the transaction in each block is legitimate by solving the puzzle of the hashing algorithm, which is known as “proof of work problems”.
The first miner to complete the “proof of work work” the block was rewarded with a little cryptocurrency.
Once verified, transactions are stored in public blockchains throughout the network.
Because the number of transactions and miners increases, the difficulty of solving hashing problems also increases.
Although Pow helps get blockchain and decentralized, the digital currency that is not totted from the ground, it has some real deficiencies, especially with the amount of electricity consumed by these miners trying to complete “evidence of work problems” as soon as possible. According to the Bitcoin Digiconomist energy consumption index, Bitcoin miners used more energy than 159 countries, including Ireland. Because the price of each bitcoin rises, the more miners try to solve problems, consume more energy.
All power consumption is only to validate transactions have motivated a lot in digital currency space to find alternative methods to validate blocks, and the main candidate is a method called “Peg Evidence” (POS).
The post is still an algorithm, and the goal is the same as the proof of work, but the process of achieving its goals is very different. By post, no miners, but instead we have “validators.” The post relies on trust and knowledge that everyone who validates transactions has skin in the game.