There are three main issues that prevent wider blockchain adoption – governance, scalability, and upgradeability. A consensus algorithm is emerging that combines the features and benefits of proofs of work, stake, and burn. Ideas coming out of this concept can solve many problems that blockchain projects face.
Proofs of Work and Stake
Blockchain is a type of game where players compete to validate transactions. They group these transactions into several blocks and match them with the transaction blocks of other players. These people have purchased hardware to create blocks. A proof of stake system works in a different way. Block producers are not forced to run hardware and spend capital to get block rewards. Here they only have to spend the capital liquidity. The problem is that an attacker that acquires a 51% stake in a platform’s base currency can get control of the whole network. This attack can be prevented by implementing systems that take away block rewards from the user accounts. However, it increases the network’s computational overhead requirements. This is the reason Solana-like projects have centralized solutions while ethereum 2.0 is finding it difficult to implement PoS.
Proof of Burn Consensus Algorithm
Can there be a solution that combines the benefits of both proof of work and proof of stake? Proof of burn concept could be the solution. New initiatives like smart contracts, market makers and non-fungible tokens meet many of the requirements of this concept. In the case of NFT miners, it can be difficult to keep track of accounts and the amounts they have spent. The increased load it places on the network can be the reason it has not been implemented. Non-fungible tokens have fortunately provided a way to distribute block rewards only to genuine block producers. It results in NFTs that work as virtual miners and are highly customizable.
