Proof-of-Work
Proof of work (PoW) is a form of cryptographic zero-knowledge proof in which one party (the prover) proves to others (the verifiers) that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expenditure with minimal effort on their part.
The goal of proof of work is to prevent users from printing extra coins they didn’t earn, or double-spending. If users were able to spend their coins more than once, it would effectively make the currency worthless.
One of the most famous blockchains using PoW is certainly Bitcoin. Created in 2009, Bitcoin pioneered the field of decentralized digital cryptocurrencies, and to date it is the clear leader by market capitalization.
How are BTC Earned?
Bitcoin mining is the process of earning bitcoin in exchange for running the verification process to validate bitcoin transactions. These transactions provide security for the Bitcoin network which in turn compensates miners by giving them bitcoins. Miners can profit if the price of bitcoins exceeds the cost to mine.
The incentive may help encourage nodes to stay honest. If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth. — Satoshi Nakamoto
Bitcoin mining is the backbone of all proof-of-work blockchains. It involves 3 main concepts:
- The verification and addition of transactions to a decentralized public ledger. Every single transaction can be viewed here.
- Proof-of-work calculations of the puzzle are solved on an average every 10-minutes. The new block is added to a blockchain by the miner who first completes the puzzle. The difficulty of the puzzle, which is also called the Network Difficulty, gets changed after every 2016 block (which happens almost after every 16-days). The hashrate (computational power of the miner) amount contributing to the Bitcoin network is known as the network difficulty.
- Block reward is given to that first miner who solved the Bitcoin puzzle first.
No matter how many miners, it still takes 10 minutes to mine one bitcoin. At 600 seconds (10 minutes), all else being equal, it will take 72,000 GW (or 72 Terawatts) of power to mine a bitcoin using the average power usage provided by ASIC miners.
Graphic Cards:
Let’s take an example of 5 X RTX 3070 graphic cards, which provides 309 (MH/s) and uses 1100 (w) of consumption and for this calculation we use $0.10 per (KWh). Based on our calculator the profit per month of mining Bitcoin with this rig is $-79.20.
We also use the same rig to mine Ether and you can see the profit per month is $544.60.
According to data from The Block, Ethereum miners recorded $77.36 million in daily revenue on Monday, while Bitcoin miners recorded $67.17 million.
Proof-of-Coverage
Proof of coverage (PoC) is the algorithm used on the Helium blockchain. The algorithm uses radio waves to validate Hotspots are providing legitimate wireless coverage. The validation works by adding new blocks, performing new tasks and rewarding miners with rewards.
The Helium vision is the most ambitious we have seen in the blockchain space since the advent of smart contracts on Ethereum. Helium represents a fundamentally new approach — one with a radically reduced cost structure — to deploying and managing wireless networks at scale. — Tushar Jain
Helium LongFi is a new, open wireless protocol optimized for miles of range, and maximum battery life for low-bandwidth IoT devices. LongFi combines the LoRaWAN wireless protocol with Helium blockchain so any LoRaWAN device can transfer data on the Helium Network.
LongFi delivers roaming capabilities and supports micropayment transactions so customers only pay based on network usage without needing to deploy gateways or network servers.
How are HNT Earned?
The amount of HNT distributed to Hotspots depends on the type of “work” they perform based on the value to the network. This validation of network contribution is accomplished by a new work algorithm called Proof-of-Coverage (PoC).
To participate in PoC, Hotspots receive instructions (or ‘challenges’) to transmit payloads to any nearby Hotspots to witness and verify. These single-hop challenges are also known as ‘beacons’. Hotspots without neighbors earn less as they can only issue Challenges, and are unable to have their beacons verified. After the first year, distribution amounts adjust.
1. Challengers: 0.95%
Hotspots are chosen by the network to issue challenges, encrypted messages over the Internet, to a target group of Hotspots. Challenges are used by Proof-of-Coverage to validate wireless coverage. Hotspots can issue challenges from any location, not just to local Hotspots.
2. Proof-of-Coverage: 5.31%
Hotspots earn a share of HNT for participating in Proof-of-Coverage and validating their peer’s wireless coverage. The amount each Hotspot earns depends on how often it is directly involved in Proof-of-Coverage activity.
3. Witnesses: 21.24%
Hotspots that monitor and report Proof-of-Coverage activity (beacons) of other Hotspots receive a portion of HNT depending on how much activity they’ve witnessed, and the reward scaling of the Challengee.
4. Network Data Transfer: 32.5%
HNT is distributed to Hotspots that transfer data from devices on the network. The amount of HNT is allocated proportionally based on the amount of data a Hotspot transferred.
5. Consensus Group: 6%
Hotspots are randomly elected to the Consensus Group to perform tasks including validating transactions and publishing new blocks to the blockchain. Group members receive a portion of the 6% distributed to the Consensus Group.
Helium Mining Overview | Halvening | Rewards | Consumption | Useful Tools
Proof-of-Space
Proof of space (PoS) is a means of showing that one has a legitimate interest in a service (such as sending an email) by allocating a non-trivial amount of memory or disk space to solve a challenge presented by the service provider.
PoSpace are syntactically different: In Bitcoin the miners race to find a PoW, the miner who finds it announces a new block to the network, the block gets attached, the miner gets its reward, and the miners switch to extending this new block. Using a proof system like PoSpace, every miner can immediately compute a PoSpace, so we somehow need to specify who “wins” and when to continue with the next block. The PoSpace-based Spacemint [PPK+15] blockchain assigns a quality to each PoSpace (this quality is simply the hash of the proof), and the protocol specifies that the PoSpace of best quality announced should be considered as the extension of the chain.
How are Chia Earned?
You can farm Chia on the unused storage of your laptop, desktop, or corporate network and, in return, you have the chance to receive rewards in chia for helping secure the blockchain. The software allows you to allocate a certain amount of unused disk space to create plots. Since the only resource intensive step is the initial plotting, once you download the Chia node software, your drives will be plotted in the background. Once plotting is complete, your computer will begin farming on your behalf and the software does all the work and tracks your rewards for you. Ongoing farming uses very little network bandwidth and almost no resources other than storage. By making the farming process available to anyone with unused disk space, It is moving towards the goal of a truly decentralized blockchain that will also serve as a cross subsidy to the storage and cloud industry.
Proof-of-Stake
The Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins they hold. This means that the more coins owned by a miner, the more mining power they have.
Proof-of-stake has drawn more than a few critics. One reason is that Ethereum developers have been quick to tout the advantages of proof-of-stake, but it has not yet been proven to work because it doesn’t exist yet.
Proof-of-stake is a long awaited addition to Ethereum. Ethereum creator Vitalik Buterin proposed it in the white paper as far back as 2013.
The proof of stake (PoS) seeks to address this issue by attributing mining power to the proportion of coins held by a miner. This way, instead of utilizing energy to answer PoW puzzles, a PoS miner is limited to mining a percentage of transactions that is reflective of their ownership stake. For instance, a miner who owns 3% of the coins available can theoretically mine only 3% of the blocks.
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