Will Proof-of-History be the Future?
Cryptocurrencies use consensus algorithms, which is a method of securing the blockchain and ledger of a cryptocurrency. The thousands of cryptocurrencies today use a wide variety of consensus algorithms, each with its advantages and disadvantages. In this article, we will be looking at a unique consensus algorithm called Proof-of-History. Proof-of-History is currently used by two blockchains, namely Solana and SafeCoin. We will be comparing Proof-of-History to several well-known consensus algorithms to find out if Proof-of-History can be the future.
Table of contents
- Solana’s Proof-of-History
- Problems with Solana’s Proof-of-History
- SafeCoin’s Proof-of-History
As most people know, Bitcoin was the first cryptocurrency to use the then-revolutionary consensus protocol called Proof-of-Work (PoW). In PoW consensus, miners compete with each other on the network to solve complicated mathematical puzzles. When a miner has found the solution, he sends a block with the solution to the network. Next, all other miners must verify whether the solution is correct. This process is repeated repeatedly so that the blocks on the network form a chain (hence the name blockchain).
In recent months there has been a lot of criticism for PoW mining as it is very energy-consuming. Due to this criticism, there has been a shift in the cryptocurrency industry to more energy efficiënt alternatives. There are at this moment a few alternative consensus mechanisms; the most notable are Proof-of-Stake and Proof-of-History.
With Ethereum currently being in the middle of transitioning from PoW to Proof-of-Stake (PoS), PoS is becoming more popular than ever. PoS leverages validators to secure its consensus instead of miners, which are used in PoW. Validators lock up a certain amount of the respective cryptocurrency on the network in a process called staking. Thus, validators validate the blockchain and do not have to compete to generate the new block like miners do but are picked randomly. However, Validators with a more significant amount staked, have a higher chance of being selected to generate a block. When a validator is appointed, they get to propose a block. When other validators accept this block, the validator that submitted the block gets rewarded with the fees of the transactions in the proposed block.
Proof-of-Stake also comes with the benefit that it is much more environmentally friendly compared to a Proof-of-Work blockchain. This is because generating a block is much more energy-efficiënt than mining as less computing power is needed.
Solana utilizes a combination of Proof-of-Stake and Proof-of-History (PoH), giving Solana a unique hybrid consensus algorithm. PoH enables the Solana blockchain to be extremely quick while at the same time keeping the blockchain decentralized and secure.
Solana uses SHA256 hash functions to secure all events and transactions broadcasted on the network. This function allows Solana to take an input and produce a unique output that is extremely difficult to predict. For example, Solana takes the output of a transaction and uses it as input for the next hash. Thus, the sequence of transactions is now built into the hashed output.
Solana’s hashing process results in a long, unbroken chain of hashed transactions. Solana’s PoH consensus mechanism creates a precise, verifiable sequence of transactions that a validator adds to a block without the need for conventional timestamps.
For a more detailed explanation of how PoH works, you can watch the following video here.
Problems with Solana’s Proof-of-History
Proof-of-History has tremendous amounts of potential. But with any consensus algorithm, there will also be drawbacks, which is also the case with PoH. If you want to participate as a Solana validator, you must meet strict hardware requirements for your validator. Any validator that does not meet these requirements is excluded from generating blocks. Because of this, Solana struggles to achieve true decentralization. When comparing Solana validators with traditional PoS validators, the hardware requirements are miles apart. With PoS, any standard computer equipment will be able to run a full node, allowing anyone to participate in the consensus, allowing for more decentralization.
Another problem with Solana’s implementation of PoH is the amount of data that is stored on-chain. Solana’s PoH is capable of thousands of transactions per second, but this generates enormous amounts of data. For example, one transaction is about 250kb. So 50,000 TPS of 250kb equals about 40 petabytes of data per year. This amount of data that has to be stored leads to an unsustainable consensus mechanism that will only result in more centralization as many companies, let alone private individuals, cannot save this amount of data.
SafeCoin utilizes many of the same features that make Solana such a great platform. The thing that sets SafeCoin apart from Solana is that SafeCoin is a fair launch community-driven project that has already made numerous improvements to its Proof-of-History consensus mechanism compared to Solana. So has SafeCoin improved the efficiency of its validators, drastically dropping the validator’s hardware requirements. This drastic decrease in hardware requirements allows the SafeCoin network to become much more decentralized as most modern computers are capable of running a full node. SafeCoin has also made improvements to the consensus, and on top of that, SafeCoin’s implementation of an improved compression algorithm decreases the amount of space a transaction takes up on the blockchain, resulting in less storage being required to keep a full copy of the blockchain.
Proof-of-History consensus shows enormous potential. Proof-of-History is faster and more energy-efficient than most consensus mechanisms. This is due to the timestamps every transaction receives. However, Solana’s implementation of Proof-of-History still has its drawbacks. For instance, the high requirements of the validators’ hardware and data capacity required to run Proof-of-History successfully limit new people from becoming new Solana validators. SafeCoin’s upgrades to Solana’s Proof-of-History consensus mechanisms allow the SafeCoin network to be more decentralized as hardware requirements are lower compared to Solana’s. On top of this SafeCoin’s implementation of Proof-of-History uses less disk space for storing transactions as the SafeCoin team has drastically improved the data compression used.
Proof-of-History definitely has a bright future ahead as both ecosystems are seeing more and more developers join in. And it is definitely worth it to follow both projects as development continues.
SOL Donation Address: 7Zth3zPNkjeRouyJrTVgne537NfwvNp2kLTU8apVp7SH
SAFE Donation Address: 3aHEKicGmWiTgcNifFkJjpJ3BCxgf5AqFnJrJfYqJUax