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For a decade, Bitcoin’s proof-of-work system has run without disruption. In a proof-of-work scheme, Bitcoin miners compete to solve a cryptographic puzzle associated with a block of transactions.
Every ten minutes, all the Bitcoin miner nodes race to be the first to solve a block of transactions. Only one miner wins each block, meaning the other nodes’ time was ultimately wasted. There is also a massive expense of electricity.
Bitcoin is a system with low transaction throughput—about 7 transactions per second. Computer scientists have wondered—is there an alternative way of doing consensus? What if we took all the wasted compute power from proof of work, and allocated it in a way that makes transactions get processed faster?
But Bitcoin’s governance tends to be extremely conservative. A change to the consensus mechanism probably won’t happen any time soon in Bitcoin.
Ethereum’s consensus mechanism is modeled after that of Bitcoin—proof-of-work mining. But Ethereum’s governance ethos is quite different. Ethereum is in the process of planning and implementing proof of stake, an alternative consensus mechanism in which trusted validators are chosen to validate blocks of transactions.
Subhan Nadeem is a student at the University of Waterloo where he studies computer science and business. He is the author of several popular articles on Medium that explain blockchain concepts. He joins the show to talk about crypto from the point of a student—and gives us a great walk through of different consensus mechanisms.
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