• What is Proof of Work?

• What Mining Techniques Exist?

• Why do People Mine?

• What is Proof of Stake?

• What alternative Distribution Networks exist?

*Overview of Consensus Protocols

Why do People Mine?

Computer algorithms are responsible for today’s success of digital currencies like Bitcoin and Ethereum. The network relies on our global community coming together to achieve distributed consensus which simply means people agreeing on something.

In cryptocurrencies like Bitcoin, ‘something’ means agreeing on which transactions or blocks are valid and which are invalid to be added/rejected to the blockchain.

People mine because they can collect rewards and microtransaction fees for their participation in maintaining the network to increase overall efficiency.

Proof of Work 

The common concept used by miners to successfully validate blocks onto a public blockchain

• “Proof” is difficult to create but is easy for others to verify

• Randomized Algorithm challenge

• Computers (GPU/CPU/FPGA/ASIC/Cloud Mining/Pools)

• It's not simple to manipulate any data on the network because it requires lots of power 

• More Miners = Safer Network

• Questionably unsustainable due to energy inefficiency

• In the future, cryptocurrencies such as Bitcoin will be more susceptible to a “51% attack” when mining ‘bounties’ are no longer given and transaction fees become the main reward

Proof of Stake

This consensus protocol has all of the coins in existence from day one they are distributed through a variety of methods including token sales or bounties.

PoS requires you to show ownership of a Cryptocurrency, the more you have collected, the greater your odds of being rewarded will be! If mining rigs were replaced by coin ownership and you had accumulated 1% of the cryptocurrency you would own 1% of the network.

• Beneficial for long term investors as this is the Crypto-equivalent of collecting dividends

• Stakeholders (validators) are paid through network transaction fees

• Random selection if you will be rewarded in the lottery based on ownership

• You must lock the Cryptocurrency into a node

Alternate Consensus Protocols

There are other types of consensus protocols such as Proof of Burn, Proof of Capacity, Proof of Activity, and Proof of Elapsed Time.

There is always the possibility of new technology creating different ways for us to mine however, it will be a group decision to develop and support the networks that truly have beneficial interest for humanity in mind.

Standard consensus protocols discussed within this video also can be customized to create a unique system tailored to match a specific Cryptocurrencies objectives.

Right now the majority of Cryptocurrencies use Proof of Work and Proof of Stake!

In Summary: Mining comes in many different variations but is an essential part of how distributed consensus is achieved. Cryptocurrencies can operate with many types of distributed networks however we primarily use Proof of Work or Proof of Stake because of how the algorithms are designed to make participation rewarding for everybody.