In today's world, determining whether anything is true or not has become difficult. It may be a simple bank transaction or an election vote; the only way to check these actions is to maintain a record of them. Today's society verifies these records by centralised authorities, which may be a bank, a government agency, or a person with the authority to confirm the data.
This concentrates a great deal of power in the hands of centralised authorities and allows for loopholes to be exploited at the expense of consumers. As a result, Satoshi Nakamoto developed Bitcoin in 2009, which became the first form of money to do away with the need for a central authority.
Bitcoin was the first of several different types of cryptocurrency to enter the market. Satoshi's innovation allowed for the creation of a digital decentralised cash system that was free of government control. A decentralised network is a peer-to-peer file-sharing network that is accepted by a blockchain, which is a payment network with accounts, balances, and transactions.
Blockchain
A blockchain is a decentralised database that is fully open to the public. The data stored is calculated by the form of blockchain, which varies depending on the type of cryptocurrency. Its security stems from its innovative hashing and delivery techniques. The hash that defines a block and all of its contents is the second. It can be used to detect changes in the block in the same way as a fingerprint can.
The data stored varies by blockchain type; for example, Bitcoin uses both a sender and a receiver and keeps track of the total amount of money in the network.
A blockchain is made up of many components, including peer-to-peer network relationships and their ability to establish a place for the network to connect and exchange information remotely.
The next step is cryptography, which facilitates safe communication in a reliable manner. The consensus algorithm is the set of rules that determines the requirements for introducing a new block after cryptography. The Proof of Work algorithm, for example, is used in Bitcoin.
These algorithms, also known as blockchain protocols, are various systems for reaching consensus and verifying transactions within a blockchain network. Some blockchain protocols necessitate the use of physical mining equipment such as nodes, while others rely solely on coins, while still others combine the two.
Blockchain Protocol
Proof of Work
The first is Proof of Work, which, as previously mentioned, uses physical mining rigs with numerous graphics cards to power the numerous machines. The more powerful a rig is, the more likely it is to win the next block and collect the coins. This is one of the most costly protocols due to the high initial equipment and power costs.
Proof of Stake
Another protocol that does not include the same physical rigs as POW is Proof of Stake. This protocol enables coin holders to contribute to a network by staking their coins in digital wallets, allowing staking, and then leaving the device while earning staking rewards. POS is viewed as a deterministic method that is based on a person's wealth or stake rather than a block incentive.
Delegated Proof of Stake
Delegated Proof of Stake is a different protocol that assigns nodes to serve others and add new blocks to the chain based on votes. The participants have control over who can certify the ledger in this process.
Proof of Weight
Unlike POS, which is based on the number of coins in a wallet, Proof of Weight takes into account both the number of coins and the number of files they carry in the network. This approach offers an extra opportunity for citizens to hold their coins and contribute meaningfully to the scheme. To be rewarded with a set amount of bitcoin, miners must solve complex cryptographic mathematical puzzles.
Proof of Capacity
The proof of capacity approach is the last of the blockchain protocol's many variations. A node must pay for space in order to participate in POC. The more hard disc space you have, the more likely you are to mine the next block and win rewards. The algorithm first produces a large number of plots on the hard drives; the more plots you have, the better the chances of finding the next block.
Final thoughts
These are only a handful of the many different types of protocols that can be used. All protocols are designed to achieve successful decentralisation and are based on the platform's application type.
This highlights the need for an opportunity that encourages everyone, not just the wealthiest few, to contribute to the networks. Because of the high cost of purchasing all of the coins in an unreliable economy, it is proposed that a new blockchain be controlled in terms of hashing.
Proof of stake was the only protocol that was consistently used, considering the fact that it is more difficult to run and defend against attacks from a technological perspective. Attacks on the network are more complicated with POS. This approach is primarily used to obtain incentives by contributing nodes to the scheme.
These are some of the most common blockchain protocols that should be familiarised with in order to gain a basic understanding of the philosophies that underpin blockchains and help to elevate the definition of cryptocurrency.