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Andreas M. Antonopoulos 2014-08-17 15:26:30 -04:00
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@ -146,7 +146,9 @@ Freicoin was introduced in July 2012. It is a _demurrage currency_, meaning that
==== Consensus Innovation: Peercoin, Myriad, Blackcoin, Vericoin, NXT
Bitcoin's consensus mechanism is based on Proof-of-Work using the SHA256 algorithm. The first alt-coins introduced scrypt as an alternative Proof-of-Work algorithms, as a way to make mining more CPU-friendly and less susceptible to centralization with ASICs. Since then, innovation in the consensus mechanism has continued at a frenetic pace. Several alt-coins adopted a variety of algorithms such as scrypt, scrypt-N, Skein, Groestl, SHA3, X11, Blake and others. Some alt-coins combined multiple algorithms for Proof-of-Work. In 2013 we saw the invention of an alternative to Proof-of-Work, called _Proof-of-Stake_, which forms the basis of many modern alt-coins. Proof-of-Stake issues coins to owners of existing coins who present signatures from addresses containing more than a target value. For example, those owning 1% of the coins can generate 1% of the reward with signatures instead of Proof-of-Work. {explain proof of stake - certificate of deposit example} In this section we will look at examples of alt-coins innovating on the consensus mechanism.
Bitcoin's consensus mechanism is based on Proof-of-Work using the SHA256 algorithm. The first alt-coins introduced scrypt as an alternative Proof-of-Work algorithms, as a way to make mining more CPU-friendly and less susceptible to centralization with ASICs. Since then, innovation in the consensus mechanism has continued at a frenetic pace. Several alt-coins adopted a variety of algorithms such as scrypt, scrypt-N, Skein, Groestl, SHA3, X11, Blake and others. Some alt-coins combined multiple algorithms for Proof-of-Work. In 2013 we saw the invention of an alternative to Proof-of-Work, called _Proof-of-Stake_, which forms the basis of many modern alt-coins.
Proof-of-Stake is a system by which existing owners of a currency can "stake" currency as interest-bearing collateral. Somewhat like a Certificate of Deposit (CD), participants can reserve a portion of their currency holdings, while earning an investment return in the form of new currency (issued as interest payments) and transaction fees.
*Peercoin*