Cyrrently, every single transaction in cryptocurrency blockchain needs to be ‘mined’ by powerful computers solving complex mathematical problems. The process ensures the security of the network, preventing double spends and other malicious actions. The process is known as a “Proof of Work” mining (the protocol underpinning Bitcoin and many others) uses as much energy as the nation Denmark. It’s a costly and lengthy process, and with the user base increasing everyday, traditional blockchains are sufferening increased workload.
With each transaction needing a lengthy confirmation process, the blockchain cannot scale easily as more and more users join the network. For example, Bitcoin transactions are now slow and expensive, with long backlogs of transactions waiting their turn.
Not only Bitcoin is under scrutiny. Ethereum is suffering also from the lenght of the process. Although the network can currently handle around fifteen transactions per second, significantly more than Bitcoin, we need only look at the recent Cryptokitties mania to see the crippling effect of high network load.
With the severe limitations proof of work seen, it seems impossible for real-world use cases to succeed. VISA and other non-blockchains handle thousands of transactions per second, and if the many projects emerging in the crypto space are to compete, something needs to change.
Proof-of-Stake game changer
Now, as we enter a new upgraded era of blockchains, the new system of transaction confirmation will be introduced. Instead of powerful miners verifying transactions on the network, users will be able to ‘stake’ their Cryptocurrency. If the stakers act honestly, confirming legitimate transactions, they will be rewarded with interest proportional to their stake. If the stakers act maliciously and try to cheat the system, their stake will be lost. One of the first blockchain platforms to implement this feature is known to be Ardor Blockchain Platform