Blockstack anchors to Bitcoin network with new mining algorithm
A proposed new mining algorithm, Proof of Transfer (or PoX), intends to become a key tool in realizing a user-owned internet and the promise of a secure Web 3.0.
New York-based decentralized computing network Blockstack PBC unveiled the mining algorithm to anchor its network to the Bitcoin blockchain -- a list of records called blocks, linked using cryptography. Blockstack's network lets developers build applications that put users in control of their personal data.The framework supports over 400 decentralized applications, including solutions for blogging, fundraising, and creative collaboration.
If adopted as part of the new blockchain proposals comprising Stacks 2.0, expected later this year, Blockstack would combine Proof of Transfer with Bitcoin to enable new possibilities for developers building a user-owned internet.
The Stacks 1.0 blockchain operates as a "virtual blockchain" on top of Bitcoin. Each transaction in the Stacks 1.0 chain is also a Bitcoin transaction. All data of a Stacks transaction is encoded within the metadata of a Bitcoin transaction.
Mining mechanisms used by these algorithms are divided into proof-of-work (nodes dedicate computational resources) and proof-of-stake (nodes dedicate financial resources).
The intention behind proof-of-work and proof-of-stake is to make it practically unfeasible for any single malicious actor to have enough computational power or ownership stake to attack the network.
With proof-of-work, a miner does "work" that consumes electricity and is rewarded with digital currency. The miner is, theoretically, converting electricity and computing power into the newly minted digital currency. Bitcoin is an example of this PoW blockchain.
With proof-of-stake, miners stake their holdings of a new digital currency to participate in the consensus algorithm and bad behaviour can be penalized by "slashing" the funds of the miner.
Proof of Transfer is proposed as part of Blockstack's anticipated blockchain Stacks 2.0, expected to be launched in Q2 2020. Proof of Transfer generalizes the concept of proof-of-burn.
It uses the proof-of-work cryptocurrency of an established blockchain to secure a new blockchain. However, unlike proof-of-burn, rather than burning cryptocurrency, miners transfer the committed cryptocurrency to other participant(s) in the network.
Developers would be able to use Proof of Transfer to launch new blockchains that are anchored in Bitcoin's security.
PoX can give incentives to earn Bitcoin rewards to participants of new blockchains, which can potentially be used for use cases like consensus participation, ecosystem developer funds, and incentives for specific users.
To participate in the leader election process to mine a new block and earn tokens on the Stacks blockchain, PoX requires miners to commit Bitcoin (BTC) as a substitute for native Proof-of-Work.
PoX allows network participants to earn BTC rewards by actively participating in the consensus algorithm.
Consensus algorithms for public blockchains require computing or financial resources to secure the blockchain state. Miners process and secure each block transaction on the blockchain.
In 2019, Blockstack became the first company in the US to receive SEC qualification for its digital token offering. The company is funded by Union Square Ventures, Y Combinator, Lux Capital, Digital Currency Group, Naval Ravikant, and others.
Muneeb Ali, CEO of Blockstack PBC, said:
"Bitcoin is already the king of proof-of-work (PoW), so by extending access and creating new ways to leverage the security and trust of the Bitcoin network, we're activating the fundamental building blocks of a user owned internet. In other words, Proof of Transfer allows everyone to benefit from Bitcoin's security without needing to modify Bitcoin."
More and more companies are developing solutions for the blockchain to enable safe and secure transactions that scale and are recorded on the "open distributed ledger" with no need for a central server. Blockchain solutions will help adoption of cryptocurrency for mainstream goods and services and help us all with our peer-to-peer transactions.
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