Tuesday, February 12, 2019

Therefore Their Possibility To Receive Rewards And Add Transactions Is Decreasing

Proof of Burn (PoB)

Another alternative system is Proof of Burn, which like PoS, is an energy saving method. Here, the miner sends coins to an unused address and receives points in reward. These points are comparable to the hash-rate of mining and are therefore used to validate blocks and transactions.

It is crucial that this algorithm is only working in connection with other mining possibilities - to be able to burn coins, they have to be created in the first place.

The idea behind it is that an attack would be very difficult and carries an enormous element of risk, unlike the PoS system where we already looked at the “Nothing-at-Stake” issue.

Proof of Importance (PoI)

The system proof of importance, which is used by NEM (one of the largest currencies out there), is not only rare but also has enormous potential.

In this algorithm, the user is collecting points on an importance score. This score can be an indicator how trustworthy the member is. The users are validating transactions, just like in every other blockchain algorithm with the exception that everyone, regardless of his/her wealth, starts at 0.

If a person is making false approvals or tries to betray the system, their rating is lowered. Therefore, their possibility to receive rewards and add transactions is decreasing. You can compare it to financial advisors - you trust the one with good ratings and maybe personal recommendations, but if they are rated negatively you will probably stay away.