Both proof of work and proof of stake are consensus algorithms that are designed to achieve reliability in a network involving multiple unreliable nodes.
In Proof of work;
- The probability of mining a block depends upon how much work the miner does in the form of a computer solving an equation
- A block reward is given to the first miner who provides the solution to each equation
- Miners compete to be the first to find the solution
THE PROBLEM WITH POW IS THAT IT USES UP A LOT OF ENERGY.
Whereas, in Proof of stake;
- The probability of validating a new block is determined by how large of a stake a person deposits( how many coins they block from their balance)
- The validators do not receive a block reward, instead they collect fees as their reward
AND THE POS HAS NOTHING-AT-STAKE PROBLEM
Current blockchain based projects are designed to function in a linear sequence; one operation functioning after the other. This is a crucial function so that operations occur precisely in their desired order. This also means that they can be easily added to, and new instructions are not capable of affecting the earlier operations of the script.
There are two things that are cool about this particular data structure.
1) A change in any block invalidates every block after it, which means that you can’t tamper with historical transactions.
2) You only get rewarded if you’re working on the same chain as everyone else, so each participant has an incentive to go with the consensus.
A block is a container data structure. In the Bitcoin world, a block contains more than 500 transactions on average.
So, a block is composed of a header and a long list of transactions.
If you are a miner, your job is to gather transactions from the transaction pool in to a “candidate block”, and to try and add this candidate block to the blockchain. Blockchain is a distributed database existing on multiple computers at the same time. It is constantly growing as new sets of recordings, or ‘blocks’, are added to it. Each block contains a timestamp and a link to the previous block, so they actually form a chain. The database is not managed by any particular body; instead, everyone in the network gets a copy of the whole database. This ledger is visible on every node participating in the network. Old blocks are preserved forever and new blocks are added to the ledger irreversibly, making it impossible to manipulate by faking documents, transactions and other information.
Blockchain is a growing list of records, called blocks, that are linked using cryptography in a *linear sequence forming a chain. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, blockchain is resistant to any modification of the data.
Here is a link to a more elaborate article. We highly recommend you to give this one a read since it has broken down the most important aspect of blockchain which is the decentralised consensus to how would it look like, in a, “pre-tech Pen and Paper era, on an island”.
Blockchain is just a decentralised database.
What is a database?
A database is a data structure used for storing information. This includes data that can be queried to gather insights for structured reporting used by entities to support business, financial and management decisions. Government also make use of databases to store large sets of data which scale to millions of records. A user with permissions associated with their account can change entries that are stored on this centralised database. By changing the ‘master copy’, whenever a user accesses a database using their computer, they will get the updated version of the database entry. Control of the database remains with administrators, allowing for access and permissions to be maintained be a central authority.
This is not at all the same as with a blockchain.
For a blockchain database, each participant maintains, calculates and updates new entries into the database. All nodes work together to ensure they are all coming to the same conclusions, providing in-built security for the network.
I have tried to explain Blockchain in many different ways. Do check out my other answers, let me know which one you think is the easiest to understand.
“ Libra doesn’t compete with Bitcoin. It competes with other fiat. It’s a private currency vs state currency. (The first time this has been possible with a Blockchain’ish tech.)” -twitter
What is relevant to us is the point that, despite referring to itself as a Blockchain, there is actually no blockchain data structure in Libra. Which is also observed by the other blockchain experts.
For a better understanding on Libra, here is a video of our renowned Blockchain experts discussing the tech.
The Blockchain technology has imaginations running amok. The technology has grown to the point that it can be applied to any need for an accurate, trustworthy record. The hype surrounding blockchain tech is quite possibly the result of how easy it is to dream up a high-level use case for the application of blockchain tech.
Apart from the conventional banking and finance;
A few of the Blockchain applications I can think of are:
By decentralising the music streaming model, record contracts will be less complex. Increased transparency, automation, and accountability will do wonders for the music industry. See infographic here.
Blockchain will bring effeciency and transparency to the real estate. Blockchain will also compliment the idea of split ownership so that everyone can have a piece. See infographic here.
The information that is stored in the blockchain cannot be faked – it’s time-stamped and public. The host governments and support organizations could start issuing digitally-authenticated identification documents based on the blockchain.
- prove their identity and that of their family members;
- open bank accounts;
- sign contracts or apply to university
For players, blockchain will allow for a richer, decentralised gaming experience, with greater transparency and control over their gameplay. This will include true ownership of digital assets, the ability to use those assets across numerous games and worlds, and security in knowing their account cannot be compromised by any overarching authority. See infographic here.
Blockchain technology can mitigate transaction fees, provide fair exchange rates, and reduce fraud – all via a decentralised, largely-automated payment framework. That means lesser fees, stronger security, and more for a Decentralised Cross-Border Trade. See infographic here.
Payments are deposited into a contract and can be released only if conditions are met. When the conditions are met, the money is automatically sent to the advertiser. Direct Payments will minimize needs for third-parties, reducing costs and the transactions are immutable, providing credibility and safety. See infographic here.
Donors will have the visibility as to where their funds are going. The increased transparency will cause a growth in trust, further motivating people to donate to charity funds in general. See infographic here.
Blockchain will allow the dematerialisation of documents such as certificates and transcripts and, it is immutable, so it will reduce the risk of fraud and provide a more effective solution for digital identity. See infographic here.
Solar panels, smart electricity grids, and blockchain tech will allow for house to house electricity trading, The system allocates surplus to the smart grid and converts it into a digital token that can be sold on the electricity market. See infographic here.
Libra is a cryptocurrency, that is to say, “a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets”.
Libra is first and foremost, a cryptocurrency created to let people access and participate in the Libra Network. Users shall be able to exchange fiat currency into these digital currencies and use them in online transactions
The key takeaways after going through Libra’s white paper are;
1. Governed by a non-profit
- Libra’s governing body, the Libra Association, is a non-profit based in Geneva, Switzerland, which will eventually have 100 geographically diverse founding members.
- No member will control more than 1% of the blockchain network, the Association said.
- Libra is starting on a permissioned blockchain, meaning (unlike Bitcoin) only founding members will have access to the network. But there are plans for Libra to transition into a permissionless network over time, meaning “no single party will be able to unilaterally change the rules of the network.” The Association says that for the Libra Blockchain to operate as a “true public service,” the network eventually has to be permissionless.
Note: Libra Blockchain currently uses Byzantine Fault Tolerant (BFT) consensus protocol and is based on VMware’s HotStuff framework.
2. Pseudo-anonymous transactions
Much like public cryptocurrencies, Libra’s all non-custodial transactions will be pseudo-anonymous. It means that the cryptocurrency’s transaction amount, timestamp, and public blockchain addresses will only be visible to members on the network.
3. 7 major companies have chosen to drop out of the consortium
- Mercado Pago
- Booking Holdings
MEANWHILE, IBM HAS EXPRESSED INTEREST IN WORKING WITH LIBRA ON ITS DIGITAL CURRENCY EFFORTS.
4. The digital coin is essentially a stable coin as it is pegged to government-issued currencies such as USD, EUR, YEN, POUND, and SGD
5. The project has drawn attention from:
- American Regulators
- South Korea
For a graphical representation of the above, check out this infographic