The blockchain is going places. Many changes have been happening in a short span of time. Two major upgrades on the network protocol (commonly referred to as hard-forks) left too many people worried. Seriously, you have to chill. Nor the blockchain, nor ethereum, IOTA, ripple, and so many other disruptive networks are at their final stage. Upgrades are expected. Hell, upgrades are welcomed! Increased security, reliability, speed, block size.. I could go on (not indefinitely, tho) but the point is: most distributed ledgers are far from their final stage. The majority is still using proof of work to validate transactions.
What does this tell you?
That the world spins another day and we get closer to proof of stake. A brief explanation of these concepts, before we move forward. Proof of work is how transactions get validated in almost all crypto networks. Bitcoin, Ether, Litcoin, and most of cryptocoins in general, use this method. It works by allowing miners – which are nothing more than nodes, or processors – that validate transactions by running a cryptographic algorithm to decipher the data of the block. When the data is deciphered and published on the blockchain, the miner who last validates the block gets a reward. That reward will be given in the form of the network currency (bitcoin, ether, litcoin, etc). Each block has a hash connecting to the previous block and a time-stamp. There are other forms of proof of work, but all work around using computing power to decipher transaction data. Imagine you would like to mine ether. You would download the ethereum network, run an ethereum node and tell your processor (via geth) to start validating blocks and, in essence, mining ether. As your processor is not optimized to mine a coin, you wouldn’t get that much ether, and wouldn’t make that much money. But it can be a very profitable business. Many companies exist solely to mine bitcoin and ethereum. It’s still a growing business.
.. is it ever going to change? Ohhh boy, can’t wait!
The Ethereum community is trying the hardest to implement proof of stake. A working version of proof of stake, I mean. This concept has been around a lot. Its initial concept stated that users of the coin (like investors, people who own the coin) could validate transactions if there was an economic incentive. So they would get rewarded, like the miner guys in proof of work, without the burden of spending energy to validate transactions.
Wooow. That rippled a whole through my mind!
Well, it didn’t work. If you could validate three different transactions with contradicting information, without a penalty, why validate only one, and risk the chance of not getting a reward (if the transaction does not get added to a block, like an incorrect transaction)? That’s the thing. Without a “stake” (a penalty), people would validate everything. Obviously. We’re greedy beasts.
What this new and better version of proof of stake dictates is: you may validate a transaction, if you bet a stake on it. And that stake will most likely be the amount of currency in your wallet. So you do not really want to try and trick the network because if you do, you will most likely lose all your funds. And that kids, is how you solve a problem!
That’s the simple version of proof of stake. It has more complex cryptographic rules that I won’t get into. Not because I don’t understand them, but because I really don’t understand them.
Lastly, we cannot ignore “the tangle”. Directed Acrylic Graph, or DAG, is the most epic distributed ledger ever created. The concept is absurd, in a very good way. IOTA is the best example to explain how the tangle works. You do not have blocks, you have a map. And the map shows how many times a transaction has been approved, and who approved it.
"But how do transactions get approved", you ask?
By users of the network, of course. If you want to send a transaction, you must approve at least two. This way, people validate transactions of other users. And only if the transactions they validate get validated by more people, and become more secure, they are able to send their own transactions. It’s a vicious cycle of goodness. Is it that simple? Of course not; there are complex cryptographic algorithms running the tangle, to make it secure. It’s still in a beta version, IOTA I mean, as it still relies on the majority of the network being controlled by the owner. Eventually, it will be entirely run by the network users. This insane new distributed ledger allows for a very special e-commerce type: between machines. Because transactions are not sequential, they’re not time-stamped. What this lacks in usability for transactions between people or organizations, it compensates by allowing offline transactions. When you use IOTA, you’re simply accessing snapshots of the distributed ledger, you never access the whole map at once. And why should you? You’re rarely looking to see all transactions, right? So IOTA allows machines to communicate amongst themselves, transact between them, and at a later moment in time, update transaction results to the main-chain. Powerful isn’t it?
Some blockchains already allow dAPPS (distributed applications), which also work like secondary blockchains of different services. They can also work offline, and you can also access just a snapshot. But they still work in blocks, not in distributed maps like the tangle.
The machine is moving and i'm very much looking forward to see where it takes us!
basic ref:
@youtube.com/watch?v=BSkUGfilJ
@youtube.com/watch?v=QYWtwZyAnC8&t=347s
@youtube.com/watch?v=uygl-zefhw4
@youtube.com/watch?v=CKfJmKaJ9Dc
@youtube.com/watch?v=Egp8wNvu6k8
@reddit.com/r/Bitcoincash/comments/721r5m/bitcoin_cash_whitepaper_released/
@ethereumclassic.github.io/
@en.bitcoin.it/wiki/Proof_of_work
@en.bitcoin.it/wiki/Proof_of_stake
IOTA. We will be good friends with machines. We will need to be good friends with machines.
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