Back in 2011, when Bitcoin network experienced its first noticeable growth, few of its users and proponents worried about the energy consumption of the new Proof-of-Work consensus. Yet, Sunny King and Scott Nadal, through their Peercoin Project already addressed this issue and formulated the legitimate question: Is the energy consumption really essential in achieving the consensus? To most Bitcoin maximalists, the answer is straightforward yes. Similarly to gold, where the energy and labor used in mining gold gives it value, the energy consumed in mining Bitcoin not only achieves and secures the consensus, but also backs Bitcoin’s appreciation. Still opinions diverge on what really gives gold monetary value. The Austrian School proposed that it must arise from an initial commodity value. Others speculated that gold could have little value, once nation states will strip gold of its monetary roles. The same type of debates are rising in the crypto community. Naturally investors and users who are attracted by the monetary utility, are curious to understand what gives a coin value and what type of system is better fitted for future global scaling. In some sense Peercoin took on the adventure of solving this central monetary mystery. Peercoin managed to separate the energy consuming component known as mining from the consensus algorithm, and limited energy’s role to issuance only. Peercoin’s approach to consensus was quite pioneering. It abandons the amazingly successful proof-of- work consensus of Bitcoin entirely, in search of an algorithm that has absolutely no dependency on energy consumption at all. Proof-of-Stake consensus technology further tested the theory that monetary value does not derive from energy consumption, nor does it require intrinsic value Monetary utility alone could give value. In an energy free consensus system, we refer to the process of block generation as minting, instead of the energy intensive process of mining. The introduction of proof-of-stake consensus was a major break-through in the development of blockchain technology. It not only eliminated the cost associated with mining in order to form distributed consensus, but also greatly expanded blockchain’s ability to scale-out, paving the future for diverse applications of the technology.
Since the Peercoin experiment, its creators have moved towards other projects and the last involvement is with project VEE (Virtual Economy Era) a blockchain database cloud project. Again Sunny King and its team are hoping to inspire and push for the evolution of blockchain consensus with a new design called “supernode proof-of-stake,” or SPoS, which requires specialized hardware to operate. When it comes to VEE and the SPoS technology, King’s focus has expanded into a different kind of sustainability — adoption. By creating modular pieces of software that can make blockchain “as easy as using a database,” King said, should make the technology more accessible to more people. Distinct from Peercoins consensus, SPoS is built with specialized hardware in mind and while the exact details of this are to be decided its creator hinted that the memory and bandwidth requirement would be much higher than average PC’s.
The idea came while searching for an answer to an old and ongoing struggle identified during the time working on Peercoin, the ‘cold minting’ problem. Also known as ‘cold-staking’ problem, and tries to answer to the question of how to allow the participants in the network to stake their holdings while keeping those assets in a secure, offline location. Because it requires transferring a stake right to a third party, peercoin developers were concerned that it could lead to participants delegating their staking role to someone else, potentially leading to the formation of pools, which some see as a centralizing tendency.
“The concern is that people will start offering services as nodes and people will trust their minting power to single collective points of failure,” peercoin developer, Nagalim.
However, this is what King is trying to fix with his new design. The code makes it ideal to run the algorithm in optimized hardware environments, similar to how ASICs perform for proof-of-work. Still, the electricity output is minimal, so King isn’t worried that the energy consumption will be seen as wasteful, like some feel about Bitcoin’s mining process. And while the system is more centralized by design, King has worked to increase the security of the network, coding in an assurance that each supernode has an equal say — this is preventing a single entity from gaining too much power. w
Similar with any other developments feedbacks, the community is again divided and afraid of not making a mistake by changing their previous design. However their developers argue that the Supernode Proof-of-Stake Consensus is an evolution toward high performance blockchain systems. The ecosystem resource can be directed more effectively toward hardware upgrade of supernode, and the system response is not only fast but also much more predictable and stable. During the past years of digital money we witnessed heated debates around governance models and consensus protocols. Divergent opinions concluded with hard or soft forks of the network and it seems to be an efficient way to please most of the parts engaged in a network. What will happen with VEE is unclear and hard to predict, but we are looking forward to this update and any developments made for the Proof-of-Stake environment.