A blockchain is the lifeblood of any cryptocurrency, and it must be secure, scalable, and swift. Many blockchain technologies already exist in the market, the most popular ones being Bitcoin and Ethereum’s Proof-of-Work.
Being the premier cryptocurrencies may give them the advantage of reliability and security, but Bitcoin’s mining process is riddled with environmental and financial challenges. Ethereum; well, there is a proposed Proof-of-Stake 2.0 for the network.
Currently, it uses Bitcoin’s Proof of Work, but the mechanism is less than satisfying for the value Ethereum desires to offer. The new one promises to improve scalability and correct many other defects on the blockchain.
Proof of Weight is another consensus algorithm that you may have heard of. It answers the questions about environmentally sustainable systems of mining cryptocurrency. Scalability and security are other upsides of the blockchain, and equally, renowned crypto projects utilize it.
So, what is proof of weight, and how does it promise to reduce the environmental strain of cryptocurrency mining, among other things?
What is a Blockchain?
Blockchain is a word that gets thrown around daily in the crypto sphere. But it is the most important feature, and without it, the system collapses. What is this hype around the blockchain?
Picture the formation of a secure and long chain. The first metallic piece represents the first block, or Genesis block, as it is commonly called.
It was created in 2009 and is the basis for every other Bitcoin block. Above all, transparency is an important aspect of digital currencies, and the permanence of the block ensures that.
Miners or nodes are connected to each block they add to the blockchain, and it cannot be altered or erased. Fifty years from now, the validator would be found and made accountable if there were to be a problem with block 487.
This is a secure way to prevent common problems from centralized financial institutions.
However, without consensus algorithms to secure the blocks, transparency will be impossible to achieve. This is where options like Proof-of-Work, Proof-of-Stake, and Proof-of-Weight come in. These are methods used to confirm transactions and reward validators where required.
Some use a single system, like Proof-of-Work and Proof-of-Stake but Proof of Weight is a broader consensus mechanism because it employs multiple algorithms.
What is Proof of Weight?
Unlike other validation processes that earn you an incredible reward, you often do not get paid to validate transactions on a Proof of Weight algorithm in digital currency bits.
Proof-of-Work, Proof-of-Stake, and Proof-of-Weight; are all algorithms used to achieve a consensus or agreeability on their blockchains. Every blockchain needs a consensus mechanism to approve the validity of blocks.
For Proof-of-Weight, honesty is the most important virtue any validator or node needs. That is why Algorand, one of the cryptocurrencies that use this system, assigns weights to users with the most tokens in their wallets.
Forks and double-spending are a risk on blockchains, and Algorand and other users of the Proof-of-Weight consensus mechanism believe that if holders with the highest to lose are invested in the safety of the network, the chances of these attacks occurring are lower.
In order words, you will want to protect your interest, which may not be enough incentive for new validators.
Algorand is an excellent example of the Proof of Weight consensus mechanism.
Filecoin and Chia are other networks that use Proof-of-Weight, but the weight can be anything, not necessarily the number of tokens held.
Proof-of-Spacetime and Proof-of-Reputation are examples of the other types of consensus mechanisms in the Proof-of-Weight consensus model.
But the downside is that allowing two-thirds of the weightiest users to determine the validity of blocks is the embodiment of centralization. In addition, there is no incentive for them, and it is not nearly as robust as other consensus mechanisms.
However, there is less environmental impact, and forks and double-spending have truly been nonexistent, so the system works.
Proof of Stake Vs Proof of Weight
Imagine you had to lose some of your cryptocurrency if you made a mistake on the blockchain. But you get rewarded for each correct block you validate.
It seems like an easy way to make money and secure the network, and that is what the new Ethereum consensus mechanism offers. It is called Proof of Stake, and it requires less energy consumption to validate a block.
The more tokens you have, for example, Ether, the higher your chances of confirming the blocks of transactions. This method consumes less energy because you do not exactly need a computer and other mining equipment.
Based on your stake in the network, security will be your priority. In addition, holding a significant amount of Ether tokens is no joke. You need 32 tokens to qualify!
Such a hefty holder will be recognizable, at least within the network.
And in decades from now, if it is discovered that they tampered with the blocks for selfish reasons, they can easily be found.
That is proof-of-stake for you. It has not been launched yet, but the information gathered from the testnet designed to mimic its real-time operation, Proof-of-Stake, may be the future of consensus algorithms.
North of 128 validators will be required to vote on the validity of blocks added to the chain. If two-thirds of them are in agreement, the block will be recorded on the blockchain.
But you must first offer those 32 Ether tokens to the network as a stake. This is what improves your chances of selection for confirming blocks. It is centralized to an extent, too, just like Proof-of-Weight.
It would be impossible for a personal attack to be directed at a network that uses Proof-of-Stake because the group verifying the block needs to control 51 percent of the Ether before they can attain such power.
On the contrary, users are selected by the network to validate blocks on the Proof-of-Weight consensus mechanism based on the value they add to the blockchain.
It is common to confuse the two consensus algorithms because they operate similarly. But where Proof-of-Stake only requires Ether for the selection process, Proof-of-Weight chooses people with the highest of anything to make decisions.
This can be the weightiest amount of Spacetime, the highest reputation, or, like Algorand recommends, the highest number of token holders on the network.
Proof-of-Weight can be said to share similarities with Ethereum’s Proof-of-Stake, but the latter provides incentives for users. They get rewards by staking their tokens, even though they may lose them if they attempt to attack, alter, or tamper with the block.
Conversely, the Proof-of-Weight mechanism, especially Algorand’s, does not leave any incentive for users. Perhaps that is why the network selectively targets the highest holders because they have the most to lose.
But considering the positive impact on the environment, validators are not making a huge sacrifice after all.
Proof of Work Vs Proof of Weight
The difference between Proof-of-Work and Proof-of-Weight is that the former is not environmentally sustainable. At the same time, the latter focuses on a greener way to approve records of transactions.
With Proof-of-Work, you must solve complex mathematical problems before confirming a block. And these equations take time, the longest in the blockchain technology sphere. This makes it less scalable, despite its high energy consumption.
Ethereum and Bitcoin are two pioneers of the PoW consensus mechanism. In essence, miners, as the validators of blocks are called, exchange fiat money for cryptocurrency.
However, it is done at the environment’s expense because of the high energy consumption of the mining equipment. What’s more, not everyone gets a reward once the hash has been discovered. Only the winner gets selected to add the block to the blockchain.
Granted, there is a limit to the number of bitcoins to be mined, 21 million in total. But before this number is attained, global energy-reserve may be at great risk.
Comparatively, Proof-of-Weight puts the responsibility on the most weighted users of the network. They make the unified decision to add a block to the blockchain or not. And usually, two-thirds of the weightiest users decide.
They only need to vote to validate a block. Once again, their more extensive portfolio determines if they will be chosen to verify transactions or not. But at least each user will not need heavy equipment, and neither will there be a substantial loss in time because there is no need to solve any mathematical problems.
This is what gives the Chia Network and other cryptocurrency projects that use the proof-of-Weight consensus tool an edge over bitcoin. For instance, the energy consumed from mining Ethereum has been estimated to measure up to the consumption of Malta, an island-state in the Mediterranean.
In contrast, Chia requires less than a fraction of that energy to validate transactions.
Proof-of-Weight offers advanced scalability because no complex mathematical problems need to be solved, slashing the time required to add records to the block.
But the lack of incentives offered by a Proof-of-Weight consensus mechanism is one good reason many cryptocurrencies may choose to adopt the other options in the market.
Real-life use cases of Proof of Weight
Algorand initially developed Proof-of-Weight to prevent one individual or a group of people from controlling the records added to the blockchain. The network assumes that at least two-thirds of users who add the most value to the protocol will be honest.
Within ten minutes, they would have determined, synchronously, that the block is worth adding to the blockchain.
Choosing two-thirds of the users to validate the blocks is based on the belief that one-third of users cannot be dishonest, is not far-fetched and the Adversary theory explains it.
Lazy honesty is what the system relies on. The idea is that each player selected by the protocol only needs to stay online and stick to the recommended instructions. And since they will not always participate in the process, the least they can do is adhere.
The system has been designed to run in a permissionless and permissioned setting. The former means that users can join anytime and can own multiple digital keys. They only need to buy or receive Algorand tokens from another user.
In a permissioned environment, on the other hand, users are not free to own digital keys at will; things are more controlled.
A coordinated attack on the system is one of the greatest threats to any blockchain. In the Algorand protocol, an Adversary is presumed to be in charge of this influence. He makes decisions for them, primarily determining whether a block is valid or not by intercepting their messages.
It is also assumed that he can use the messages of any of the users to distract them from following the instructions set by the protocol.
However, Algorand believes that it is impossible for a single entity, the Adversary, to influence the decision of members chosen by the Byzantine Agreement.
For one, it would be next to impossible because users are selected randomly, and a cryptic code is used to communicate with them. The Adversary would not know who to target.
Additionally, two-thirds of users with the most interest in the protocol cannot unanimously consent to alter or tamper with the blocks being recorded, so security and affordability are catered for adequately.
Chia is another cryptocurrency that uses Proof-of-Weight. It adopts this system because it aims to solve the problem of sustainability in the crypto sphere.
The network users get to contribute to block validation based on their space and time value. It is called Proof-of-Time or Proof-of-Space.
Each interested user is allocated a virtual “plot,” which is used to “farm” Chia coins. It is premised on a system where users mine tokens based on space availability on their devices.
Essentially, the more space you have, the more mining opportunities you have. Instead of exchanging Chia tokens for the earth’s limited resources, the bulk of the energy relies on hard drive space.
High-performance graphics cards and supercomputers are essential when farming heavy cryptocurrencies like Bitcoin and Ethereum. But with Chia, mining and earning are incentivized based on the amount of storage space on your system and the time you are willing to devote.
Filecoin is a cryptocurrency designed to make storage space available to users worldwide. The idea behind it is to reduce the reliance on centralized storage options like Dropbox, Google, and the Cloud.
With Filecoin, you can rent out unused storage space to anyone anywhere in the world, based on a bid.
You guessed it – to participate in the validating or mining process, you must lend your excess storage space to the network. And the more you have, the higher your chances of contributing to the security process.
Proof-of-Reputation is another algorithm under the Proof-of-Weight consensus mechanism. It entails creating a reputation for a node based on its level of contribution to the network, its activity, transactions, and asset value.
Proof-of-Weight may be a transparent and reliable method of recording transactions on the blockchain but the lack of incentivization is what may hold it back.