Soon, the much-anticipated Ethereum 2.0 implementation will go live. The first phase will involve an upgrade from the existing power-hungry Proof of Work consensus, to the more efficient Proof of Stake. Like Ethereum itself, Proof of Stake has stood the test of time, having first emerged in 2012 as it became apparent that Proof of Work was neither scalable nor sustainable in terms of energy consumption.
Now, even despite several attempts to transform Proof of Stake through delegation and voting rights, the second-oldest consensus model continues to be adopted by various projects in its purest form. Here, we explain the history and usage of pure Proof of Stake.
Proof of Stake vs. Proof of Work
When Satoshi Nakamoto invented Bitcoin, one of his ingenious strokes was to deploy Proof of Work in Bitcoin mining. Bitcoin makes use of game theory, providing coins as rewards to miners as an incentive for them to keep mining and thus maintain the Bitcoin network.
However, as Bitcoin’s network and usage has grown, so has the amount of energy required to run the network under the Proof of Work consensus. Currently, Bitcoin consumes more energy than many countries do.
This energy consumption is almost entirely attributable to the Proof of Work consensus. Therefore, not long after Bitcoin was invented, developers began working on alternatives. In 2012, the inventors of Peercoin, Sunny King and Scott Nadal, proposed the Proof of Stake consensus in their white paper.
In Proof of Work, the incentives are earned by miners who are prepared to demonstrate the work they’ve put into solving calculations, which is what consumes the energy. Proof of stake removes the need to invest energy (or work) and replaces it with a financial investment.
In the Proof of Stake model, the network is comprised of those who hold the network tokens and are prepared to stake them for the right to validate blocks. How the right is awarded is determined by the network rules. In some cases, it may be related to the age of the staked tokens to incentivize participants to remain in the network as long as possible. Other variations of Proof of Stake use a kind of lottery.
Adoption of Proof of Stake
It’s worth noting that despite King and Nadal pioneering the concept of Proof of Stake, Peercoin wasn’t a pure Proof of Stake blockchain. It operated a hybrid consensus under which Proof of Work provided the initial coin minting but would be replaced by Proof of Stake over time as coins became available.
The first blockchain to launch with an initial coin balance and run on a pure Proof of Stake consensus from the genesis block was Nxt, which launched in November 2013. It was closely followed by Blackcoin, which launched less than six months later.
Since then, there have been several iterations on the overall concept of Proof of Stake. Perhaps the most well-known is delegated Proof of Stake, the consensus method developed by Daniel Larimer and used in his projects, Steem and EOS. In this model, token ownership conveys voting rights, and holders elect a fixed number of nodes to produce blocks. It’s proven a popular concept, with Tron, Tezos, and other projects utilizing the same idea.
However, it’s also somewhat controversial, as unlike pure Proof of Stake, it imposes a limit on decentralization. In the Nxt implementation, as with Ethereum 2.0, anyone can participate in the network provided they’re willing to stake their coins.
Algorand’s Strange Claims to Pure Proof of Stake
It’s the ability of Proof of Stake to enable true decentralization that’s ensured its enduring usage over the years. Other projects that have adopted Proof of Stake include Cardano and Algorand. Somewhat oddly, the latter, which launched in 2019, has embarked upon a marketing campaign touting itself as the first pure Proof of Stake blockchain.
Despite having been called out on this by several crypto publications and one of the original developers of Nxt, Algorand appears to be sticking to its story. The claim is evidently causing confusion in some quarters of crypto Reddit. One newcomer posted his general befuddlement with the situation, which, like many discussions on crypto Reddit, was met with heated debate.
Algorand wasn’t the first or the last project to implement a pure Proof of Stake consensus, and neither is it the biggest. When Ethereum goes live with Proof of Stake later this year, it’s being predicted by some that the restriction on supply will cause a massive price rally. If that proves to be the case, then King and Nadal’s creation could prove to be among the most valuable contributions to blockchain.
Mode Adds Bitcoin to Reserves, Joining Microstrategy and Square
A UK-based fintech firm has just announced a large purchase of bitcoin using its cash reserves. Mode Global Holdings, an already bitcoin-friendly financial company, has become the first UK publicly traded firm to allocate part of its reserves to the cryptocurrency. The announcement follows those of Microstrategy and Square. As many cryptocurrency industry observers suspected, […]
A UK-based fintech firm has just announced a large purchase of bitcoin using its cash reserves. Mode Global Holdings, an already bitcoin-friendly financial company, has become the first UK publicly traded firm to allocate part of its reserves to the cryptocurrency.
The announcement follows those of Microstrategy and Square. As many cryptocurrency industry observers suspected, Microstrategy’s August revelation appears to now be inspiring others.
Currency Debasement Prompts Mode to Invest 10% of Cash Reserves
First, there was Michael Saylor’s Microstrategy. Then, came Jack Dorsey’s Square. The two companies adding BTC to their balance sheets reveal an emerging appetite for bitcoin as protection against inflation and economic crises.
Mode is the latest publicly-listed company to realize bitcoin’s importance. The UK fintech firm announced the decision via press release on Wed 21 Oct.
The firm says that the bitcoin allocation is an effort to protect the assets of investors from currency debasement. It mentions record low UK interest rates of 0.1% in its justification.
The company recently completed an IPO in which it raised £7.5 million. The press release states that the decision to invest in bitcoin is an effort to “maximize the value of returns” from its IPO.
Despite its recent investment foray into bitcoin, Mode is no stranger to the digital asset. It describes itself as “the bitcoin banking app.” It also sells BTC, as well as the ability to generate interest from holdings.
Another Public Company Finds Refuge in BTC
As mentioned, Mode is by no means the first publicly-listed company to take on exposure in bitcoin. Illustrating this shift is Microstrategy CEO, Michael Saylor. In 2013, Saylor publicly dismissed bitcoin on Twitter:
After eventually doing some research into the cryptocurrency this year, Saylor completely changed his mind.
Recent appearances on various industry podcasts, along with passionate tweets like that below, have quickly elevated the CEO to legendary status in Bitcoin circles:
Whereas Bitcoin previously appeared to represent a tool for criminals, it’s now emerging as a hedge against macro uncertainty. Like Mode, both Microstrategy and Square cited their own concerns about fiat currency debasement in the wake of unprecedented coronavirus stimulus packages around the world.
The nature of these businesses lends themselves to such investments. Both Square and Mode are well-accustomed to the cryptocurrency industry, having both offered BTC exposure for some time.
In the case of Microstrategy, the board of directors is just five-strong with Michael Saylor controlling around 72% of the voting power. It, therefore, would have been much more likely for Microstrategy to invest in BTC compared to other publicly-listed companies.
Some industry observers believe that this is just the beginning of a steepening institutional adoption curve.
The feud between Bitcoin and Ethereum is a long-standing one. ‘Feud’ isn’t exactly the right word for it. Perhaps, the communities have fought over which is the superior coin for quite some time. However, comparing BTC and ETH is like comparing apples to oranges, while both may be fruits, both are different and alike in their own way.
Here are a few examples:
Bitcoin is more ‘money’ than Ethereum. Bitcoin’s major focus was to be an alternative payment system to the US dollar. Hence, payment/value transfer is the main focus of Bitcoin, while with Ethereum, there are a plethora of use cases that range from smart contracts, building dapps, the world computer, etc.
Bitcoin is an asset that has higher s2f which is its main attraction/selling point to the global audience. Bitcoin can hold value [aka store of value] and is digital gold, hence, this narrative is quite alluring to the investors. As for ETH, people may find it hard to grasp Ethereum as a blockchain.
While fundamental differences are many and can be elaborate, here are comparisons of an on-chain metric that tries to show the differences between the two.
Bitcoin addresses worth $1 hit a new high of 24 million, and so is the same with ETH addresses holding $1 ETH at 21.4 million.
This is both good and bad, depending on how one views it.
On the bright side, Bitcoin has had the 1st mover advantage, however, ETH has almost caught up with bitcoin even though it was launched in 2015, 2016. Considering ETH’s much-awaited and much-delayed ETH 2.0, these numbers could easily be overpassed, should ETH successfully move to ETH 2.0.
To conclude, comparing these coins is counter-cyclical. Bitcoin’s goal is much different than what Ethereum intends to do, so comparing them would be a wasted effort. While the two, as mentioned, are different from each other, trying to build a gateway between the two would benefit both the ecosystem better.
Yearn Finance, one of the leading DeFi protocols, has recently made an addition on Gemini Dollar (GUSD) vaults to its platform. The firm has not yet revealed any strategies or potential earnings from this new addition to the platform. It is recently reported that the other four stablecoin pools on the platform have seen some yearly growth.
This new addition by Yearn Finance is appreciated by Cameron Winklevoss, founder of Gemini exchange. He seems to be quite delighted by this move and believed that the future belongs to the DeFi sector.
Yearn Finance Founder’s Github Updated With More Details
It is also reported that Github of the founder of Yearn Finance recently got updated with the additional details on the Keep3r network. It is believed that this is going to act as a smart contract job platform for all the projects that require some extra operations. Here the job is used for smart contracts that require an entity to perform actions. It is also mentioned that the network will be powered by KPR tokens and these tokens are issued as rewards against job completion.
Daniel Lehnberg Explored How Protocol Should be Considered
There has been a lot of discussion regarding this protocol by the Yearn Finance and Daniel Lehnberg has also explored how this protocol needs to be considered. In the end, it is specified that it is actually not even a company and is not having any shareholders. It indicates that this protocol is not in a good position at present. It is reported that Yearn Finance has again slumped by 14% this week and is currently around the $13,000 mark. This position is still seen as a loss because it is 63% less the all-time weekly high of YFI which was around $37,000 back in September.