Like many different cryptocurrencies. You also have different blockchains. Leading to different consensus algorithms. The consensus algorithm ensures that the rules in a blockchain are complied so transactions can be validated. It’s very crucial. In addition to the popular Proof of Work, there is also Proof of Capacity. This algorithm works slightly differently than PoW. We explain here what Proof of Capacity is and how it works
What is Proof of Capacity?
We can best explain Proof of Capacity (PoC) by making a comparison with Proof of Work . It then becomes a lot clearer to you what Proof of Capacity actually is. It should probably be clear to you that miners at Proof of Work are constantly validating transactions and adding blocks to the blockchain.
Miners spend a lot of time and money for this. In an indirect way. It is necessary to have a lot of strong hardware, to qualify as a winner and to be allowed to add a block. In fact, if you don’t own a server farm or participate in a mining pool, you don’t actually have a chance to add a block.
With Proof of Capacity you also need hardware to be able to mine. However, it works a bit differently than Proof of Work. This is because much less energy is required than with Proof of Work. At Proof of Work, many nodes are mining, while in the end they do not contribute anything to the blockchain. In the end there can only be one winner, while the work of the other nodes is not used. So a lot of energy is lost.
As a user, you can deploy part of your hardware in Proof of Capacity. You can give the memory that you do not use to the network. Then you put a list of possible solutions of the block on the memory that you do not use. The moment your solution matches the block, you can add the block to the blockchain.
Proof of Capacity is actually a bit of a lottery. You have a number on your ticket, and as soon as your number matches the number drawn, you are the winner of the lottery.
Plotting and mining
We call this process plotting and mining. You are first plotting possible solutions on your hard drive. These are all solutions that remain in memory, after which they are compared with the actual answer. This second process is mining. The winner mines the block and adds it to the blockchain.
Obviously, this is very similar to Proof of Work, although the differences mean that much less energy is needed to add blocks to a blockchain that uses Proof of Capacity. That is one of the biggest advantages of Proof of Capacity.
Benefits Proof of Capacity
As we just mentioned, one of the biggest advantages of this algorithm is the energy efficiency of Proof of Capacity. But this algorithm has even more advantages. Benefits that ensure that different blockchains choose to use Proof of Capacity instead of Proof of Work.
This way, users in the network can simply use their hardware for other things after participating. It is very easy to delete everything from the hard drive. Participants therefore do not have to specially purchase new hardware to be able to add blocks to the blockchain. This is also good for the environment: it means that less hardware needs to be produced and transported. A lot less emissions of Co2 and other gases!
It also saves a lot of money for the participants. Hardware is generally quite expensive. There is no certainty at all for participants that they will actually earn money with mining. They will still have to be lucky that they are the ones who get to validate and add new blocks to the blockchain.
The disadvantages of the Proof of Capacity algorithm
But this algorithm also has disadvantages compared to other algorithms. For example, there are only a few developers who use this system. This is partly because it is a fairly new algorithm, which is not very well known among people.
It is also possible that malware can interfere with the mining process. So the security is not as close as one hopes. At the same time, security is becoming an increasingly important topic in the blockchain industry.
Proof of Capacity has also not yet been tested on a large scale. When that happens, several people expect the same thing as Proof of Work to happen. It is expected that more and more people will buy better hardware with more memory, so that they have a better chance of validating new blocks. The same has happened with Proof of Work. To be able to win, it is necessary to have a lot of hardware.
What is the consensus algorithm?
The consensus algorithm ensures that rules in the blockchain are followed. This states the protocol of the blockchain. If the protocol is not complied with, sanctions will be imposed. For example, a participant in the blockchain can be removed if he is sabotaging the case. It therefore ensures that everyone adheres to the rules properly.
But it also ensures that miners and validators are rewarded for the work they have done. The consensus algorithm determines where the reward should come from: does everyone have to pay transaction costs or are new coins released to pay the reward.
There are different algorithms. The best-known algorithms are Proof of Work and Proof of Stake. These algorithms are used by the most famous blockchains, Bitcoin and Ethereum. You therefore also see that most blockchains use these algorithms. However, more and more blockchains are switching to a different algorithm, because the aforementioned algorithms appear to work less and less well in certain situations.
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com