I will begin this assignment from the simple meaning of blockchain technology, so that the readers will understand where we are coming from.
Blockchain technology is a public decentralized ledger, that links lots of computer (nodes) in order to maintain a transparent and secured ledger.
Now, the ability of these nodes or interconnected computers to update and be in agreement (consensus) with each other in a secure, transparent and immutable manner is called consensus algorithm.
This is a procedure or protocol that makes it possible for all the nodes or connected computers to come in agreement (consensus) on the state of the ledger as it's being updated from one node or the other.
This consensus algorithm, is actually the very core of blockchain technology.
Now, as rightly pointed out by Professor @alphafx about various types of consensus algorithms. I will focus on Proof of Capacity, out of the four listed options.
It came up as one of the solution to the problems of high energy consumption as in the case of POW.
This problem has promoted cryptocoin hoarding, instead of spending as in the case of POS.
Proof of Capacity allows the devices (nodes) on the blockchain network the ability to use empty space on their hard drive to mine cryptocoins.
So, What is Proof of Capacity (POC)?
It is one of the consensus algorithm, that allows miners to leave some percentage of their hard drive (plot), so that they can participate in transaction verification. By doing this, miners will now be able to place copy of their mining solution in their storage space.
In order words, POC is defined as a consensus algorithm used in the blockchain technology, which makes it possible for mining devices to use their free hard drive to validate transactions and decide mining rights.
- Nonce: this could be any number and it can only be used once.
- Miner: this is one of the individual processors for the purpose of transaction validation. It's sometimes referred to as nodes or computers.
- Hash: it is an act of writing in codes, which is a one way function.
Hashing runs any amount of data to produce a unique fixed length string for that very Input.
- ID: this is the ability of miners to take ownership of their reputation and identity securely and backed by their Proof of capacity.
There are two aspects to the working mechanism of POC:
- The Actual Mining.
Plotting; here, the miners creates the plot files as a result they produce Nonces.
They will continually hash their data and ID until they solved the nonce.
Each nonce has 8192 hashes, that are grouped into pairs called Scoops. In all, they will have 4095 scoops.
For example, hash 0 & 1 will be scoop 0 and hash 2 & 3 will be scoop 1, and so it goes.
Mining; here the miners generates a certain scoop number and also take the corresponding nonce number of nonce 1 and then, use the scoop data to calculate a deadline value. This is repeated in calculating the deadline for each of the nonce in the miners hard drive. Having completed all the nonce in the hard drive, the miner will then select the shortest deadline and when the deadline the miner is able to produce is shorter than that of the other miners, then the miner is now able to create a new block in the blockchain and will be rewarded.
There are three projects that makes use of POC
- Unlike POW and POS, mining with a hard drive is more energy efficient an environmentally friendly.
- Any hard drive can be used even android based hard drive. Making it cheaper.
- After mining, the data can be deleted to free up space for other uses, since they are not specialized like ASIC.
- Constant upgrading of hard drive may not be necessary because, it does not give any special edge.
- Diversification is very possible because, it has affordable entry.
- Malware can attack the mining activities.
- Many developers have not adopted it.
- However, if there is increased adoption, it may start unnecessary competition to produce a higher capacity hard drive.
- Due to the possible use of higher capacity hard drives, network decentralization may be affected.
Proof of Capacity has demonstrated that it has a futuristic and positive attributes as it relates to its greener approach in mining and cheaper decentralization. Thanks to the three projects that appreciates it's prospects. The future of POC might change for good, who knows.