First a short intro on how a typical cryptocurrency consensus-mechanism works. We’ll use Bitcoin as the example:

A new bitcoin transaction is sent from wallet A to wallet B. The transaction is broadcast to all the computers (nodes) in the network, who then independently verify if it’s correct. These transactions are put together in groups called blocks. All the nodes in the network compete against each other to solve a difficult mathematical problem, and win the reward to add the new block to the blockchain in the form of a newly minted Bitcoin. This process is called Proof-of-Work (AKA: Mining) and it protects and keeps the Bitcoin network going. This Proof-of-Work (PoW) mechanism has issues that are becoming more serious as the network grows and gets adopted by more users. BlockNode will be using a consensus method called Proof-of-Stake (PoS). In a Proof-of-Stake system, the coin holders get paid transaction fees for validating transactions via their wallets.

Therefore, proof-of-stake creates an intelligible economic incentive to store the currency for the long term and it differs fundamentally from proof-of-work in a few other key areas as well:

Sustainability: Bitcoin mining alone uses an astronomical amount of electricity — 250 kWh per transaction. That is enough to power an average home for 9 days. At current growth rates, by early 2020, the bitcoin network will use as much electricity as the entire world does today.

Other cryptocurrencies like Ethereum, Bitcoin Cash, Litecoin and Monero that use the POW method also contribute to the problem and this is obviously unsustainable in the long term. PoS mechanisms do not require expensive hardware to do energy intensive calculations to add new blocks to the chain. Instead they aim to achieve distributed consensus whereby the creator of the next block is chosen via various combinations of random selection and network weight & age. This is far more energy efficient as minimal electricity is required to connect the node to the network.

Scalability: There are two elements that need to be considered for future scaling of a blockchain: a) cost of using the network and b) the speed of transactions. PoS transactions are much faster than POW as the blocktime can be minimal, because nodes don’t have to solve any difficult equations and the fees are very low as it is not expensive to run a PoS node. Blocknode also offers an instant-send feature made capable by the masternodes network.

Security: With POW consensus there will always be a chance for 51% attacks against the network. A 51% attack refers to an assault on the blockchain by a group of miners controlling more than 50% of the computing power. They would be able to prevent new transactions from gaining confirmations, allowing them to stop payments between some or all users.

They would be able to reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins. Even though this is still a hypothetical situation, it is still far more likely to occur as mining pools grow (Bitmain and their affiliated pools currently contribute 60% of the hashrate — Coindance.com), than a PoS system where the nodes are far more distributed, and the coins are not controlled by a single entity. Another fundamental difference between the two consensus mechanisms lies in the way each handles dishonesty in the network. In POW, if someone tries to cheat when creating a block, their dishonesty is forgiven by the other nodes in the network. In PoS, the dishonesty is penalized instead. Because POW reverts to forgiveness, there’s nothing stopping people from being dishonest. And dishonesty is severely discouraged in PoS because of the penalty.

Governance: Blocknode makes use of a community based treasury governance system — in short, the blocknode community ultimately decides which development and marketing path is best for the future of blocknode by allocating the monthly governance budget to a proposal — these proposals can be submitted by the community or by the core devs. Voting takes place each time a superblock is generated by the network — approximately once a month. For now, only masternode owners have the chance to vote yes or no for the proposal of their choice — each masternode has the ability to vote once per superblock.

To learn more, visit the BlockNode Telegram Channel: https://t.me/BlocknodeChatGroup