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Halving and Bitcon price: there might be a hard fork problem

bitcoin_price_hard_fork_problem
Bitcoin price continues to rise during this week, nearing the amount of $600.
In fact, bitcoin established a new positive trend during the past week, growing fast and surpassing $580 the last weekend.
Currently the Bitcoin price is $586, the highest price since August 10th, 2014, when it reached $589.

Bitcoin Price is growing

Previously we offered several reasons for this Bitcoin jump, as in the Chinese Domain article you can read here.
Data from the yuan/bitcoin market shows that the price reached a high of ¥3,866.11 ($589) there, so it would probably keep growing or remain stable.
Other experts in the bitcoin sector expressed different ideas, concerned about the problem that halving could lead to. 

Hard Fork Problem

Recently we also read about the hard fork problem caused by the halving of the reward for miners.
In fact, when the halving will occur, the miner reward for new blocks will be lower (from 25 BTC to 12,5), but their expenses for electricity and hardware will remain the same, so their profits will drop.
This could generate a hard fork problem, as miners could leave the Bitcoin core Blockchain to work on other chain to increase their profits again.

In the meantime, in fact, the ethereum price for example surged 50% in a week.

Multicurrency Wallet

Usually, if you have to store different cryptocurrencies (Bitcoin, Ethereum, Peercoin, etc.) you need to have different wallets, which are difficult to manage.
HolyTransaction is here to solve your problem, with the possibility to create a single account.
So, do you want to store Bitcoin and other cryptocurrencies? Open here your wallet for free.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio
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Can the halving event cause a blockchain collapse?

blockchain_collapse_halving
The reward halving will arrive soon and some people believe that this event could boost the Bitcoin price.
But a miner of BitBank is concerned because he fears the halving might lead to a collapse of the entire blockchain validation system. 
In fact, founder of the Chinese Bitbank Chandler Guo fears that if the price of bitcoin does not appreciate significantly before or immediately after halving, too much of the hashrate will drop off the network due to unprofitable mining, making transaction verification virtually impossible.

Bitcoin Halving

This event happens every four year: in January 2009 every new block generated a reward of 50 BTC. In 2012 the reward will drop down to 25 BTC.
The reason of the halving existence is that there is a limit of 21 million of Bitcoin to be ever generated by the system, so it exists to keep its price consistent and to protect the cryptocurrency from inflation.
But this drop will cause a lowering in profit margins for miners, that’s why Guo believes that miners who use less efficient hardware will shut down as the reward is cut.
He explained:
 
“When halving comes the cost of the electricity is the same, so it must shut down. For example, the S3 is working 24 hours, they cost $1, for example, and they can mine $1. So if mining equipment can only mine the electricity payment, they don’t need to work.”
Miners calculate their income as the difference between their reward and their electricity and machines cost; in order to maximize their profit, they need more hashing power at a given electricity cost.
To calculate the hashing power needed, Satoshi Nakamoto created an equation in the code so it can analyze how much hashing power is on the network and increase – or decrease – the difficulty.
This is the reason why Guo is concerned: if more hashing power is added, blocks can be found sooner, increasing profits for miners and speeding up the time at which difficulty must be raised. But now the risk he foresees is exactly the opposite:
“When the difficulty doesn’t change, but the hashing power shuts down immediately, there will be no next block. If, after the halving, the price does not go up, but the prices goes down, there will be heartache. It means no next block, no blockchain, all of the blockchain will be shut down immediately.”
So, if a significant share of the hashing power were to drop off the network, that would slow down the validation of blocks.
That would determine slower transactions, impacting on the confidence of the network. A crisis of confidence would generate a sell-off, causing a fall of the bitcoin price that would push more miners to the shut down, thus further reducing the hashing power and eventually leading to a total collapse.

A Different Perspective

Some other players in the mining business don’t agree with Guo.
That’s the case of Bobby Lee, CEO of BTCC, the third-largest bitcoin mining pool that controls roughly 16% of the hashrate. Lee believes that even though a drop in hashrate is likely to happen, it won’t be as significant as Guo thinks.
 
“After mining, for sure the hashrate will come down a bit, it will probably come down by 5-10%. It won’t come down by more than 30%. We’ve seen it in other cryptocurrencies that at a block halving, the hashrate does come down. That’s expected,” he explained to Coindesk.
Another of the main mining companies, BitFury, doesn’t seem concerned about the halving.
“The important point is that the hashrate decline will not compromise the security of the network and will not make it susceptible to attack. We also firmly believe the upcoming halving event is good for the industry because it will motivate Bitcoin companies to innovate,” said Valery Vavilov, CEO of BitFury.

One thing is sure: if the price will to rise when the halving occurs, there won’t be a problem, because miners will continue to be rewarded enough to cover their cost and maintain profitability.

Multicurrency Wallet

Normally, if you want to store several different cryptocurrencies (Bitcoin, Ethereum, Peercoin, etc.) you need to have different wallets, which is difficult to manage.
HolyTransaction want to solve this problem, unifying everything in a single account.
So, do you want to store Bitcoin and other cryptocurrencies? Open here your wallet for free.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio
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Bitcoin price future: it is alive and well

hot air balloon

How many times did you hear about the death of Bitcoin? About 45 according to a recent twitter post we found very funny. 
Well, according to us, Bitcoin seems to be alive and well, and there are lots of positive signs that indicate that this cryptocurrency is not dead as everybody thought.
The Bitcoin price, in fact, is now $549 (according to Bitstamp, or one of the most used exchanges in the world).Update: Bitcoin price is reaching $700 today, on June 13rd, 2016.
This means that the price rose more than 20% in the last 7 days, reaching a 1 year high, as we can see from the Bitcoin price index of Coindesk.

Reason of the Bitcoin Price jump

We tried to understand the reason behind this jump.
Of course it is hard to find a unique answer, but we saw that probably the Bitcoin price was driven by the Chinese demand, testified by the bitcoin price on the Chinese local exchange, which reached a level of $580 when it was priced $520 on the international markets.
Another important reason could be the halving process, as you can read in this insightful analysis.

Positive news about Bitcoin

But there are other reasons to be positive about Bitcoin, as several companies such as Microsoft recently started to develp their own projects related to the blockchain.
Also, several countries such as Japan started to regulate and recognize bitcoin as an official method of payment. Furthermore, Switzerland began to accept Bitcoin for Public Services.


Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio
how to mine bitcoins

Why the KnCMiners Bankruptcy might be a good news

The Sweden bitcoin mining company called KnCMiner announced its bankruptcy.
KncMiners was one of the greatest mining company who raised $15m in venture funding from Accel and Creandum, among the other investors back in 2015 after only two years of life.

Why KncMiners had to face Bankruptcy

One of the possible reason of this bankruptcy could be the three class-action lawsuit KnCMiner had to face recently. 
But CEO Sam Cole denied any relationship between their bankruptcy and these recent lawsuits.
Cole, in fact, argues that the main reason for KnCMiner bankruptcy is the decrease of the bitcoin transaction rewards for miners.
“Effectively our cost of coin – how much we produce the coins for – will be over the market price. The price is now [roughly] $480. With all of our overhead, after July, the cost will be over $480. All of the liabilities we’ll have after that time will be too high”, explained Cole.

Why the Bitcoin Mining Company KnCMiners Bankruptcy might be a positive news

In a centralized economic system currency is issued by central banks who control the emission and the value.
Conversely, in a decentralized economy currency is not controlled by any central authority and this is the reason why – in the Bitcoin case, for example, in his whitepaper Satoshi Nakamoto suggested an algorithm to define when and how many new bitcoin can be created.
According to this algorithm the number of new bitcoins is set to decrease with a 50% reduction every 210000 blocks, or almost 4 years.
As a result, the number of bitcoins will not exceed 21 million.
As the number of bitcoins is set to decrease the same thing happens to the miners reward.
Thanks to a process called halving, the rewards drop down, as it happened back in 2012 when it took down from 50 to 25 BTC.
Now it is set to become 12.5 BTC in July. 
For this reason the miners work is not so convenient anymore, so the number of miners is decreasing. Ans this means that the Bitcoin price will grow.
Also, a Bitcoin value is roughly $500, and miners cost of a new Bitcoin is more than $480 in energy and computer tools, so under that price it’s not worth doing it.

Halving process to help Bitcoin rising

<img src="/images/mining.jpg" alt="kncminers bankruptcy" height="264" width="350" />
Image Courtesy of Coindesk.com
As for any scarce product, like gold or oil, the cost of extraction is one of the main elements that determine its price. If it increases, then the miners stops to do their jobs.
As a result the offer is reduced and its value rises.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio

That’s why $440 Bitcoin price is low

Today Daniel Masters, ex trader at JP Morgan, published an interesting article about the bitcoin price on Linkedin.
In this article, Masters comments the upcoming halving of rewards for the miners and its impact on the current bitcoin price.
Back in 2012, the mining activity reached the level of 210,000 blocks mined and the first halving occured, taking rewards down from 50 to 25 BTC.
Right after that, the bitcoin price raised significantly, from $7 to $11 in nine months.
We are now at roughly 409,000 blocks, and the next halving will take place at 420,000, a level that is estimated to be reached by next july.

At that time rewards will lower again, from 25 to 12.5 BTC.

Bitcoin price will rise

According to Masters, it’s reasonable to expect another price rise following this event.
Here is his explanation:
“Prices so far in 2016 have been relatively stable. That tells me that there is enough new investment and real time demand to match the creation of $575m new coin. It seems obvious that if that dollar-sized demand persists, which I believe it will, that the price of bitcoin must rise to meet it”. 
In a few words, it’s a simple matter of offer and demand, exactly the same way as it happens in the oil market, where a reduction in production determines a rise in price, given a stable demand.
That’s basically why the current level of $440 is to be considered low.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio
What is Mining Infographic HolyTransaction

Infographic: What is Bitcoin Mining?

What is Bitcoin mining infographic HolyTransaction

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jorge
Decentralization Infographic

Infographic: Why Is Decentralized Currency Better?

Why is-decentralized currency better infographic HolyTransaction

 

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jorge

Bitcoin’s Monthly Recap of September 2015

Welcome to HolyTransaction’s ninth monthly recap for the year 2015. This past month of September has been marked by some pretty developments in old cases and the long awaited release of new products; during that time, the bitcoin price rose from a low of $229.86 on September 1st to a high of $236.12 on September 30th, according to Bitcoin exchange Bitstamp.
 
Mike Tyson Proud to Be In Bitcoin, Opens Bitcoin ATM in Las Vegas
Weeks ago, Mike Tyson announced that he would be releasing a Tyson branded Bitcoin ATM in Las Vegas. The Lamassu Bitcoin ATM currently sits at the Linq in Vegas, is the 7th in Sin City, and has gathered a lot of attention. Tyson believes that Bitcoin will grow as education on it grows. He commented: “People don’t really understand a currency based on numerical equations. I personally still don’t … but I’m grateful to be a part of the revolution and hoping that my participation in this space will lead to more conversations and help increase knowledge and awareness.”
 
More Corruption in FBI Silk Road Case As Variety Johns Comes Forward
Variety Johns, the man long associated with working with Ross Ulbricht and Silk Road, has turned himself in and revealed a very convoluted tale. He claims that a corrupt federal agent is threatening the Ulbricht family and is in control of an encrypted Bitcoin wallet with Ross Ulbricht’s bitcoins. Posting to the internet, Variety Johns revealed his real name and the alias of the supposed agent hunting him: Diamond. The years old investigation into Silk Road is still ongoing.
 
21 Inc. Releases 21 Bitcoin Computer
21 Inc., one of the most well-funded Bitcoin companies in the world, has released its first product: the 21 Bitcoin Computer. At its core, the Bitcoin computer is just a Raspberry Pi 2 with an attached 21 Inc. Bitcoin mining chip that is rather efficient. The Bitcoin computer enables a developer to have full access to the Bitcoin network as a full node. Already, the computer has become the #1 best selling server on Amazon.
 
R3 Blockchain Initiative Brings 22 International Banks Together
In a sure sign of the times, many big name banks from around the world have committed to working with new Bitcoin company R3. R3 is planning a blockchain development initiative that will update the financial infrastructure that banks use to include blockchain technology, whether or not Bitcoin will be involved remains to be seen. The CEO of R3 stated: “The addition of this new group of banks demonstrates widespread support for innovative distributed ledger solutions across the global financial services community, and we’re delighted to have them on board.”

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Satoshi

Dogecoin to allow Litecoin merge mining in network security bid

(CoinDesk) The dogecoin development team has announced that it will soon enable auxiliary proof-of-work (AuxPoW), allowing merge-mining with litecoin that will address concerns over the altcoin’s future.
AuxPoW enables the dogecoin block chain to receive work from other scrypt-based networks. Dogecoin miners will still be able to generate blocks and receive DOGE, but now, litecoin miners will contribute hashing power to the dogecoin network.
The move, announced on the dogecoin subreddit, follows a months-long period of community debate focusing on the question of long-term viability in the dogecoin network. Litecoin creator Charlie Lee suggested the idea of merge mining in April, eliciting mixed reactions from both sides of the conversation.
According to the dogecoin development team, the AuxPoW integration will require a hard fork of the dogecoin wallet block chain. No specific integration date has been given, but the development team said that testing will begin soon.
As explained in the original announcement:
“Our topmost priority has always been to provide a stable platform for the currency and its services and of course its users. We hope that with AuxPoW we can achieve that in a better way than what it currently is like. Our hashrate has been on a decline and we hope that we can gain more of it with the acceptance of proof of work from other chains.”
As expected, community members voiced both enthusiasm and concern for the AuxPoW plan. Yet, advocates for the strategy, including Lee, say that the move will ensure the stability and security of the dogecoin network.

Plan to save dogecoin

AuxPoW is not new – several coins already enable work from other mining networks, with namecoin being the most prominent example. This long-standing reputation as a workable proofing system – and the strength of the litecoin network – has gained the idea support in recent weeks.
In a recent community post on /r/dogecoin, Dogetipbot creator Josh Mohland shared his perspective on the concept, saying that AuxPoW would help solve a key problem with dogecoin: the fact that it was never intended to function as a full-fledged transaction network.
Mohland explained:
“Dogecoin was built to die quickly – none of us expected it to grow into the absurd entity it is today. With that said, there’s absolutely an easy way to save the coin from its certain death (and by death I mean 51% attacked for the lulz), and that’s AuxPoW.”
He went on to call AuxPoW “a simple change” worth the trouble, owing to the fact that the risk of a 51% attack far outweighs perceived costs.
Other community members expressed concern over the idea, saying that the move enables large litecoin pools to crowd out smaller dogecoin miners. Questions were also raised as to whether or not AuxPoW would actually help prevent a 51% attack.

Dogecoin in ‘dire situation’, says Lee

Litecoin creator Lee hailed the announcement, telling CoinDesk that the development team made the right decision during a “dire situation”.
Lee argued that the move comes at the right time given the long-term threat to the dogecoin network – and, as some have pointed out, its falling price. He added that the move provides increased security for dogecoin without any repercussions, removing a source of concern for the network and enabling broader development in the community.
Lee told CoinDesk:
“[The community] can focus on what dogecoin does best (tipping, donations, wow) instead of worrying about defensive mining and network security.”

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Satoshi

Network security and Proof-of-Work: do we need an alternative?

The Bitcoin protocol is designed using a proof of work mechanism, which determines who is permitted to sign the transactions that need to be verified.
A proof of work (PoW) is a piece of data which is computationally difficult to achieve, meaning that it required a lot of either time or hashing power (or both) to find the solution, but it’s easy to verify that this work was actually completed. Bitcoin uses a proof of work algorithm called hashcash, which has been around a lot longer than bitcoin itself, and was created with the purpose of being an anti denial-of-service (DOS) measure. Hashcash is fairly versatile and can be implemented with a number of functions; bitcoin uses hashcash-SHA256^2.
The proof of work consists in finding a target number that is below a certain target value, and in doing so the miner essentially “proves” that she performed a certain amount of “work” in trying various inputs. If I input a string into the SHA-256 hash function, there is no known way of determining what the output will be. Trial and error is the only way to find an input that will generate a hash that fits the desired criteria. In theory, you could nail it on the first try, but the probability of this happening is very small.
Given the current combined hashing power of the network, on average a solution is found every 10 minutes, at which point the block has been mined and the bitcoins are released as a reward. Every 2016 blocks, which ends up being approximately every two weeks, the algorithm moderates itself and either increases or decreases the difficulty of the problem. In practical terms, this means that it either increases or decreases the target value, so it’s easier or harder to find a value below it. This ensures a relatively smooth rate of release for newly mined bitcoins, and avoids flooding the market with coins at any given time.
It doesn’t matter whether I am using a supercomputer or a laptop to do the proof of work, it’s simply that with a supercomputer I can go through the attempts much faster, which means I have a higher chance of solving the problem before anyone else and therefore claiming the reward. The only thing that is important is how many hashes I can go through per unit of time, which is why the power of mining hardware is measured in MH/s, GH/s or TH/s (mega, giga and terahashes per second).
Some people in the cryptocurrency community have voiced the concern that miners may not be incentivized to continue mining if the price of bitcoin plummets, or simply because the reward for solving a given block decreases over time. Both are valid concerns but deserve to be addressed separately. In the first case, the assumption is that the reward amount would be too low for it to be worthwhile financially, and once all 21 million bitcoins have been mined this reward goes away entirely. Currently miners are primarily incentivized by the coinbase reward rather than the transaction fees, which is why many blocks end up with few transactions. Miners profit from the transaction fees, and the more transactions they include in a block, the more money they can make, but the opportunity cost of continuing to work on that block rather than go after a new one is high, as a competing block may win, rendering their work a waste of time and computing power.
Let’s assume that for whatever reason the price of bitcoin collapses, and therefore it is significantly less lucrative (net negative, once you factor in the cost of electricity) to mine. If miners are rational actors, most of them will stop mining, which is a problem for the network. The unintended consequence, however, is that mining would become dramatically less competitive, and therefore substantially more lucrative for those miners who continue to mine — at least in the short term. As I mentioned earlier, the algorithm self regulates to keep the average pace at which blocks are solved at around 10 minutes per block. As the bitcoin developer guide explains, Every 2,016 blocks, the network uses timestamps stored in each block header to calculate the number of seconds elapsed between generation of the first and last of those last 2,016 blocks. The ideal value is 1,209,600 seconds (two weeks).
Based on a comparison to the ideal value, the algorithm either increases or decreases the difficulty of the problem to solve, essentially recalibrating to try and get as close to 1,209,600 seconds as possible. To date, the difficulty has increased as more and more advanced ASIC miners continue to be developed, and more computing power is needed to have a chance at being the first to solve a block. However, the algorithm can also self-regulate in the opposite direction, making it easier to solve the problem by increasing the target value. Difficulty can be decreased by as much as 75%. This component of the protocol is particularly brilliant in design, as it basically guards itself against market shocks that could be produced by sudden swings in the mining power being inputted at any given moment.
Even if the bitcoins they are mining are worth substantially less post crash, if the miners believe that the expected future value of their bitcoins is significantly greater than it is at present, then it would make sense to continue mining. Alternatively, if a large percentage of miners quit because they didn’t anticipate the future value of bitcoin to make their present expenditure worthwhile, the new environment could still attract a new class of miners who are not currently mining because they don’t have the hashing power needed to make it lucrative, but if competition decreased dramatically, it would be. Presumably at this point other miners who had been mining previously would also see this and start getting back into the game, which would ultimately increase competition and start driving things in an upward direction again.
The likelihood that we see a huge drop in the price of bitcoin also decreases substantially over time, as it becomes less probable as the network expands. One of the main reasons bitcoin prices have been fairly volatile to date is that the network (by which I mean the number of consumers with wallets and merchants who accept bitcoin as a form of payment) is still relatively small. Bitcoin’s market cap has been hovering between 7 and 10 billion dollars, which means that any hedge fund worth its salt could take a position and dramatically swing the market. Bridgewater Associates, for instance, is the world’s largest hedge fund with $150 billion in global investments under management. In theory, they could buy ALL the bitcoins that have been mined to date 19x over, and still have enough left to throw in six Instagram acquisitions in for fun. And that’s only one of the top funds. Because the market cap is small, bitcoin to date has been subject to the whims of large actors; as the cap increases, there’s a strong chance that this will change.
There’s also the issue to consider that even in the absence of a price crash, incentives to mine naturally decrease over time as the amount of bitcoin received as a reward for mining a block is halved every 210,000 blocks, or approximately every four years. Theres is reasonable cause for concern that without the incentives provided by block rewards the network will no longer be secured, in that the transaction fees will not be sufficient to support the cost of securing the network. This is a manifestation of the game theory concept of the “Tragedy of the Commons” in which no individual actor wants to perform work or contribute to the community because he believes that she can reap the benefits regardless, but when everyone behaves this way, the system ends up collapsing and leaves everyone worse off. No one wants to pay transaction fees, but if everyone avoids paying them, the miners will have no incentive to keep security levels high, which could result in a systemic collapse.
To some extent, the point in time at which this problem becomes a reality will depend on the price of bitcoin, and no one can accurately predict when the network will reach that point, but even if prices continue to grow this is likely only a case of delaying the inevitable. If a bitcoin today is worth $600 and I receive 25 when mining a block, and in ten years I only receive 6.25 bitcoins for doing the same work, yet each one is worth $100,000, mining still makes a lot of sense. Even considering the investment in mining equipment, assuming that the amount of electricity I will have to expend will be higher, and discounting for 2-3% annual inflation, there’s still a substantial potential upside. There are a number of external factors (exact cost of electricity, price of ASICs or other mining equipment, etc) that will play into this and influence whether the network incentives to mine remain high enough, so it is worthwhile considering other mechanisms, prominent amongst which is proof of stake.
Proof of stake (PoS) is an idea that came about as an alternative solution to proof of work, primarily as a safeguard to some of the original protocol’s perceived shortcomings. Apparently it was first proposed in 2011 in the bitcoin talk forum by “QuantumMechanic”, and since then several models for implementation have been developed. A proof of stake scheme is similar to proof of work in that it is also a mechanism for determining who will sign the transactions in a given block, but instead of relying on hashing power, it uses ownership as the deciding factor. Simply put, if Alice holds 5% of all coins, she has the ability to mine 5% of the blocks. Theoretically this should increase network security by making it more difficult to mount a 51% attack. In order to do so, someone (probably a mining pool) would have to control over half of all coins in existence, which is much harder to do than controlling 51% of the hashing power. It’s worth considering that this isn’t impossible, as a large centralized pool could form and come to control over half the coins in circulation through a combination of owned coins and loans, for example. Realistically, however, in a proof of stake situation it wouldn’t make much economic sense to mount this type of attack. It would substantially reduce confidence in the network’s security, and likely cause the price to plummet. By crashing the value of a coin in which it is so heavily invested, the malicious mining pool would essentially be shooting itself in the foot. To some degree this is also true in a PoW scenario, but the disincentive is much stronger where PoS is being applied.
Although there’s no way to know exactly if and when an alternative to proof of work will become necessary due to a lack of mining incentives, a proof of stake scheme could also be a desirable solution for environmental and efficiency reasons. Since the proof of work process does not actually solve real-world problems, the energy is essentially burned without a real return, which is suboptimal. Implementing PoS, either in the form of a fork from the main proof of work blockchain or via the use of an altcoin that uses it (ie Peercoin, or something similar) could be significantly less costly than bitcoin mining as it currently stands, because the current system gobbles up a huge amount of electricity. Because PoS uses far less energy, as almost none is expended in the mining process, it would be substantially cheaper to make a profit mining than in a PoW scenario. It would also meaningfully reduce transaction fees in the long run, as miners wouldn’t have to charge high fees in order to cover their power and hardware costs.
We still lack a perfect solution to all these issues, and PoS is not a panacea either. One problem I see with implementing a PoS mechanism is that it could cause illiquidity in the market and lead to great concentrations of wealth. Miners would be incentivized to hold their bitcoin in order to be allowed to mine more, and therefore large concentrations pools of currency would accumulate. Currently, miners have an incentive to convert some of their mined bitcoins into dollars by selling them, but this is largely true because of a) price volatility – it is still risky to hold everything in bitcoin and b) there are still many assets that cannot be purchased using bitcoin. If PoS were implemented, and as both a) and b) become less relevant as the network expands, this could lead to a vast majority of coins being held by very few.
Despite the considerable improvements that proof of stake offers over proof of work in certain spheres, ultimately neither proof of work nor proof of stake offer a perfect solution to long-term network security concerns. Still, both clearly have useful characteristics which, applied in conjunction, could help overcome some of their own shortcomings. Just as I was wrapping up this writeup, Ryan Selkis passed along a fascinating paper by Bentov, Lee, Mizrahi, and Rosenfeld which proposes a third option, called Proof of Activity (PoA). PoA is predicated on the belief that neither PoS nor PoW are flawless, and seeks to pull in some of the better aspects of both. Given that this piece has already gotten quite lengthy in just looking at proof of work and proof of stake, I’ll write about the PoA paper separately sometime soon. The paper, titled “Proof of Activity: Extending Bitcoin’s Proof of Work via Proof of Stake”, is fairly technical, but it’s very thorough and for those who are so inclined I definitely recommend a read.

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Satoshi