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Proof of Work Vs Proof of Stake, Explained.

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The proof of work and proof of stake consensus mechanisms. Let's understand the basic differences and similarities between the two of them.

Understanding the consensus mechanism of Proof of Work Vs Proof of Stake in the Blockchain Technology.

  • Intro

The Cryptocurrencies along with the Blockchain Technology is most famous for the high-class security that it provides. It is estimated by professionals that, for a hacker, it is easier to break into a Centralised Financial Reserve and rob the funds than to take control of the Bitcoin Blockchain network.

 

  • Security through Consensus

This high-security attribute is obtained through something known as Distributed Ledger Technology and the Consensus mechanism. As the data is distributed among the nodes in the network, the same copy of data is available to everyone, hence tampering the data in some of the nodes will not affect the information on the Blockchain but would be considered as invalid by the majority of the nodes. This consensus of coming to a common point that a set of particular nodes have been tampered with is what that provides Blockchain Technology with its security.

 

  • Why is Consensus required?

Generally, a consensus is important as it results in impartial benefit for each and everyone, although the decision might not seem to be going hand in hand with each individual’s interest but is the best solution for the overall development of everyone. A number of consensus mechanism have been developed through a number of cryptocurrencies but two of the most popular one is the proof of work and proof of stake consensus mechanisms. Hence one must know the basic differences and similarities between the Proof of Work and Proof of Stake.

Proof of Work

The Cryptocurrency Miners, mine the blocks and then present it to the network so that it is added to the network and they receive a Block reward. But the blocks are attached to complex mathematical problems which are highly difficult to solve and uses brute force computations in order to solve them. With time, as the network and the number of miners increases, the difficulty of solving the problems increases too.

 

A block is then checked for its validity through the proof of work consensus mechanism and if it is found to be invalid by more than half of the members in the network then the block is discarded. Nevertheless, if the hackers gain access to more than 50% of the total network then she/he can manipulate the behaviour and can confirm an invalid block to be valid and hence a tampered block is added to the Blockchain.

 

In order to avoid this problem, the network size comes into picture which is huge in this case, and is growing day by day, hence gaining control over the members spread throughout the world at such massive scales is near to, but not impossible. It is worth mentioning that, in order to maintain the time taken for the creation of a new block, the difficulty level is automatically incremented.

 

For a real-time instance, if the network automatically observes that the time taken to add a block on to Bitcoin blockchain network is lesser than 10 minutes then the difficulty is automatically increased so as to compensate the time required for the addition of new block. Basically in this concept, the profitability of mining a block, depends on the amount of work done by the minor hence the name ‘proof of work’.

 

Proof of Stake

Even in this consensus mechanism aims at the verification and the addition of a new block to the Blockchain network but considering the amount of money a particular user stakes on a block. Hence the user who possesses the highest amount of stake is more likely to become the next block validator. This method is considered to be far more efficient than the proof of work mechanism but it is not being used that widely.

 

The Proof of Stake mechanism is considered to be eco-friendly as it does not require huge amounts of energy consumption and is also healthy for the network’s development too. One of the key features in the Proof of Stake consensus mechanism is that all the coins in the network are pre-mined. There is no creation of new coins and hence the minors are rewarded with the complete transaction fees of the transactions they verify.

 

  • Remarks

Forking a particular Blockchain is not good for the development of a network, intense experimentations were done by the researchers on the proof of work mechanism which led to the conclusion, that it restricts the forking process which in turn leads to an instability in the network, as the miners would have to distribute the computation power between the old and the new Blockchain. When compared to the proof of the Stake mechanism, as it does not require Brute Force power, forking a particular network doesn’t affect the consensus mechanism at all.

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#Bitcoin

Can Bitcoin be Traced?

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Earlier it was challenging to trace Bitcoins, but current technology has led to practical ways of tracking stolen bitcoins.

Earlier it was challenging to trace Bitcoins, but current technology has led to practical ways of tracking stolen bitcoins.

To track the person who received the bitcoin, the address owner must be aware of it.

However, governments do not want bitcoin owners to be unknown, and they are trying to regulate bitcoin in a way that can be monitored.

It’s nothing new since people have been doing blockchain analysis and bitcoin tracking since bitcoin was used to exchange stuff on the internet.

 

Is Bitcoin Anonymous?

As Bitcoin has become more popular and some criminal activity has been disclosed on the Bitcoin network, many people have wondered whether their Bitcoin transactions are anonymous or whether there are some essential complexities that they should be aware of.

Bitcoin tumblers allow many different users to put their cryptocurrency in a “bucket” and then return the same bitcoin value to each user, but with bitcoins put into a bucket by other users.

Bitcoin is not entirely untraceable, but it is a common misunderstanding, as Bitcoin is well known for masking user identity.

 

Users who rely on bitcoin exchanges ( such as Bitfinex, Binance or Kraken ) to exchange money for bitcoin must disclose their personal information to such an account.

However, governments are beginning to introduce new rules that could force an anonymous Bitcoin exchange to verify the identity of a new user before allowing them to purchase Bitcoin with fiat currency.

Create multiple addresses so that bitcoin can be randomly distributed, making blockchain analysis more difficult and anonymous.

 

Bitcoin is often presented as an untraceable payment method that facilitates illegal activities by allowing criminals to make and receive payments without being monitored.

There are many ways in which the identity of a person can be exposed to bitcoin transactions.

 

Now you have your bitcoin clean; you don’t want to waste all the hard work of using it in a trackable transaction.

As such, if you can pay with bitcoin and rely on the trader not to keep any PII records, the purchase may be anonymous.

If you prefer to spend your bitcoin on other cryptocurrencies or cash, the easiest thing to do would be to go to the exchange.

Portfolios, currency exchanges, mixing companies, and P2P sites have all been used to cheat bitcoin users.

Keep in mind that bitcoin is still the most widely accepted cryptocurrency.

 

Bitcoin is the only virtual currency with enough people who want to buy it to become moldy.

Cybercriminals use the creation and monitoring of Bitcoin portfolios, which can be done automatically, helping them find out which victims have paid.

Bitcoin transactions are public and contain all the information we need to track ransom payments, provided that we know which wallets to look at.

In most cases, payment tracking is not as easy as cybercriminals move bitcoins through multiple wallets to avoid payment tracking.

 

So, if you’re still thinking about using Bitcoin for your transaction gateway, be careful that you can track it as well.

Most users use online bitcoin exchanges to exchange bitcoins for real currency, such as bitpay, coinbase, localbitcoins, etc.

As the number of pro traders is slightly lower in online markets, it is easy to look at the bitcoin transaction by going to their bitcoin address.

 

Oaktar can be used to collect much more than the information needed to identify and link someone to specific Bitcoin addresses and transactions and can do so without relying on cryptocurrencies.

As alarming as oaktar and its activities, no new information has recently emerged to indicate that the NSA has expanded its Bitcoin monitoring efforts to other cryptocurrencies.

These protocols include CoinJoin, Dark Wallet, bestmixer, io, sharecoin, and coinwap, all of which also offer Bitcoin and other cryptocurrencies the possibility of anonymizing their transactions.

In the meantime, the more direct and intrusive methods of the NSA are also based on the fact that crypto users unconsciously compromise their internet connections, which could not be expected to monitor all cryptocurrency transactions in mass.

 

Bitcoin, the Internet currency loved by computer scientists, libertarians and criminals, is no longer vulnerable.

But Bitcoin ‘anonymity is also a powerful tool for criminal financing: virtual money can keep shady transactions secret.

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#Blockchain

Forbes releases top 50 blockchain companies list

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Forbes has released top 50 blockchain companies using blockchain technology list and these are almost all household names of the world's largest companies.

Forbes has released a new top 50 blockchain companies using blockchain technology list and these are almost all household names of the world’s largest companies. In fact, they are all billion dollar plus companies such as Amazon, Citi Group, Foxconn, Comcast and a whole host of others and unsurprisingly the bulk majority of these companies are using Ethereum.

 

Although, outside of Ethereum which is, of course, the number 1 blockchain for these companies, we do see others like Hyperledger and Quorum for example, although much rarer on the list in terms of mentions are blockchains such as Stellar Lumens or Cardano. Blockchains such as TRON, EOS, NEM, and others are not mentioned in the list of top 50 companies.

 

Companies choosing Ethereum according to Forbes:

Big businesses really like what Ethereum is doing. Ethereum has also worked very hard to make these relationships happen over the last few years and those relationships are now paying dividends big time.

 

All the top 10 companies are located in China or the United States.

The Top 10 (Forbes List):

10. Ping An Insurance Company: China

9. Bank of China: China

8. Apple: United States

7. Wells Fargo & Company: United States

6. Bank of America: United States

5. Agricultural Bank of China: China

4. Berkshire Hathaway Inc: United States

3. JPMorgan Chase & Co: United States

2. China Construction Bank Corporation: China

1. Industrial and Commercial Bank of China: China

 

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#Blockchain

JPMorgan expanding itself into the blockchain and crypto space

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JPMorgan Chase has been posting a lot of job opportunities in the blockchain and cryptocurrency industry on Indeed.com, the job listing portal.

JPMorgan Chase, the American multinational investment bank and financial services company has been posting a lot of job opportunities in the blockchain and cryptocurrency industry on Indeed.com, a job listing site. According to the data from Indeed.com, the overall job openings for the cryptocurrency industry also seems to be on a rise.

 

JPMorgan Entering the Cryptocurrency Space:

Though the CEO of JPMorgan, Jamie Dimon has always been a strong opponent of Bitcoin and other cryptocurrencies, his company has been interestingly expanding its operations in the field of blockchain and cryptocurrency.

 

Last month, JPMorgan launched its own cryptocurrency known as the JPM Coin, which will serve the bank’s precious customers in order to make transactions between them more swift and steady.

 

Back in 2018, JPMorgan had launched a blockchain powered platform known as Quorum which might be seen quite homogeneous to bitcoin and ethereum, however, it is almost fully centralized in nature.

 

Large companies entering the Blockchain Space:

In recent times, a lot of huge companies worldwide have been entering into the blockchain and cryptocurrency space. According to a recent publication by the Forbes, large organizations such as IBM, Deloitte, Cisco, Microsoft, Consensus, and others have been curiously hiring employees that are experts in the field of blockchain technology.

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