SteemitCryptoAcademy: Consensus Algorithms homework for @alphafx

It is always amazing to be part of your lectures and participate in your homework. I appreciate the simplicity with which you deliver your lectures, thank you, amiable professor @alphafx.

I have chosen to discuss extensively on Proof of Capacity.

Source

Proof of Capacity

Proof of Capacity (PoC) is a consensus algorithm used in blockchains where the available hard drive capacity of mining devices is used to determine mining rights and confirm transactions. It stores solutions to a cryptocurrency’s hashing problem by employing the available space on a device’s hard drive. This is somewhat in contrast and more efficient as compared to Proof of work algorithm and Proof of stake algorithm.

It is a solution to the problems associated with other algorithms such as high energy consumption in Proof of Work (PoW) and cryptocurrency hoarding in Proof of Stake (PoS) systems. It also allows nodes that are mining devices on the blockchain network to make use of their available space to drive mine available cryptocurrencies, it works by storing a list of possible solutions on the hard drive before the mining begins.

The solution values vary with the largest of the hard drive and give the miner better opportunities which invariably leads to winning mining reward. Take, for instance, if winning a contest is based on matching numbers on the winning ticket, there is a high tendency that the player with a longer list of numbers will possibly win.

How does proof of capacity work?

There are two-step processes in proof of capacity and they are as follows:

• Plotting
• Mining

Plotting

The first step is to plot the hard drive and this is done by creating a list of all possible nonce values through repeated hashing of data and makes use of a hashing function called shabal. Each of these nonces is numbered from 0 to 8192 and is a total of 8192 hashes. Adjacent hashes are joined to form a pair of two hashes which is called a scoop.

Mining

The second step is the actual mining process where the miner calculates the scoop number. It is a repeated process used in calculating the deadline for each nonce on the miner’s hard drive. A deadline simply means the time allowed since the last block was forged before the miner can forge a new block.

Projects of proof of capacity

There are currently three projects using PoC and they are BXTB, Burstcoin and BTCHD.

BXTB is a DeFi protocol whose main focus is on creating high liquidity and throughout stablecoin. It allows users to mine its governance token using proof of capacity. This governance token can be combined with stable coins such as USDT to get yBXTB and CHIP. The new CHIP stablecoin is used in gaming, eSports, and other sectors where transaction tokens are a necessity.

BurstCoin is a more versatile project as it explores various cases from small contracts, to crowdfunding to solutions for payment and even arbitrary messages. It provides a good concept to business owners, miners, and developers and is a good project to engage in PoC.

BTCHD is a team that uses PoC for her cryptocurrency called BHD. The goal is to help people with the issuance of credit and provide a network that can handle up to 70 transactions per second.
There are similarities between this project and that of BurstCoin and it can actually be possible to mine both simultaneously.

Other coins using Proof of Capacity system includes

• Storj
• Chia
• SpaceMint
• Permacoin

Comparison between Proof of Capacity and Proof of Stake

In proof of capacity, the work performed is based on the amount of available space in the hard disk while in proof of work, the user puts his own resources to create blocks that are determined by the network. There is high and efficient performance in both algorithms (PoC and PoS). The DLT environment in PoC is a public blockchain while it is both public and private in PoS. Burstcoin and Bitcoin ore are some of the coins that use PoC while NXT and Tezos use PoS.

In proof of capacity, work is usually done in advance by plotting rather than do a lot of work and the shortest solution to mine algorithm gives the users rights to mine the next block.

The feature of PoS is avoiding complex calculations. The users will rather pledge their crypto assets than engage in unnecessary competitions with others. The users are very interested in security and validators are selected based on the shares they own.

Comparison between Proof of Capacity and Proof of Work

There are some similarities between PoW and PoC. It is difficult to find a solution in PoW but checking results are really easy unlike the PoC where work done is based on available space on a hard disk and finding a solution is easy. Power of work has low performance as compared to power of capacity which has a high and efficient performance. They both use a public blockchain and Bitcoin, Ethereum and Litecoin use PoW while Bitcoin ore and Burstcoin use PoC.

To add a new block in PoW, the participant must prove that he has done the job while in PoC, blocks are added at the shortest solution to the mining algorithm. Participants of PoW usually foot the cost of computing resources and this is advantageous because it can be implemented where there is little or no trust. Although, the participant usually join to get rich and eventually do not maintain justice and this can be cause insecurity.

Advantages of proof of capacity

• The mined data can be wiped off easily and the hard drive can be used again for some other data storage purpose.
• It can be used on regular hard drives including the ones in android-based systems and there is little or no need for constant upgrading of hard drives.
• It is 30-times more energy-efficient than ASIC-based mining of the bitcoin cryptocurrency.
• There is a higher possibility of diversification because hard drives are cheap and readily accessible.

Disadvantages of proof of capacity

• It has not been fully adopted by many developers
• Mining activities can be affected by malware
• Space can be left redundant because data plotted on the hard drive is not reused after the mining.

Conclusion

Proof of Capacity is one of the most interesting mining algorithms. It has been a solution to cryptocurrencies challenges over the years. Although not fully adopted by developers, it has proven its ability to overcome obstacles in blockchain.

cc: @alphafx