What are the flaws inherent in both Proof-of-Work and Proof-of-Stake that make Proof-of-Signature an ideal alternative? A short explanation is given below.

Proof-of-Work

How does Bitcoin validate transactions and deter denial of service attacks? It requires a transaction-requesting entity to perform computational work. In essence, it makes data creation difficult for users but data verification easy for the network. This system is known as Proof-of-Work, a well-known protocol used throughout much of the cryptocurrency world.

However, proof-of-work is hardly an ideal solution, as its intensive energy requirements are highly problematic. These requirements derive from the computations needed to validate transactions. In 2017, completing a single Bitcoin transaction requires as much energy as a regular household uses in a week. Even the investor pays a price, as the burden of these energy costs indirectly produces downward pressure on cryptocurrency prices.

In addition, by relying upon miners, Proof-of-Work networks leave themselves open to attack. As user fees decline over time, the financial rewards of mining (via transaction fees) naturally dissipate. With fewer miners available, the remaining miners have greater leverage over a network’s computational power. If they’re able to control 51% of a network’s computational power they can instigate a 51% attack. The latter enables the attackers to produce fraudulent transaction blocks and even invalidate particular transactions.

In 2018, six cryptocurrencies have been subject to 51% Attacks. Its now known that, under the right circumstances, miners may take control of a network’s computational power with far less than 51% control.

Proof-of-Stake

Proof-of-Stake (PoS) is another major protocol for validating transactions. PoS has the advantage of being far less energy intensive than PoW. And unlike Proof-of-Work (PoW), Proof-of-Stake mining power is delegated in proportion to how many coins a miner has. As a result, PoS miners have little incentive to attack their network (as they would be attacking their currency holdings).

However, PoS also has several notable flaws. In contrast to PoW, it’s far easier for an attacker to alter a blockchain segment (as future blocks would not need to be re-mined as they would with PoW). PoS coins are also vulnerable to bribing, the cost being “proportional to the profit they are making by being honest plus the amount they will lose by being dishonest.” (BitSharesTalk)

That’s because PoS coins are susceptible to a “nothing at stake” problem. In the event of conflicting blockchain histories, participants have no strong incentive to move forward. They have, so to speak, “nothing at stake.” Indeed, they may be presented with the financial incentives to work both blockchains (thus, enabling them to “double-spend” their crypto). These opportunities are especially acute during blockchain reorganizations.

Several coins have tried to bypass this obstacle by using a hybrid Proof-of-Work/Proof-of-Stake system (by using PoW timestamping). For instance, Peercoin and others employ periodic ‘checkpoints” and limit the extent to which a blockchain reorganization can occur. However, no one solution is comprehensive at resolving the aforementioned issues.

Proof-of-Signature

Unlike Proof-of-Work, XTRABYTES’™ Proof-of-Signature consensus algorithm does not require energy-intensive computing power to process transactions. And unlike Proof-Of-Stake, XTRABYTES relies upon a system of online virtual nodes to ensure consensus. Transactions blocks are validated by the nodes that are online at the time the transactions take place. The nodes that are offline will double check the blocks when they come online; though they don’t need to sign the blocks themselves. Indeed, even one STATIC node could theoretically run the whole network.

Altogether, XTRABYTES will be employing a system of 3584 nodes, which can be “halved” at a later stage. Such halving doubles the number of nodes and reduces the number of coins held in nodes by half (as overall coin numbers remain constant).

Complementing Proof-of-Signature is XTRABYTES ’ communication system, the PULSE (Ping Unified Ledger Synchronization Equalizer) signal. PULSE alerts all STATIC nodes as to when a new transaction is ready for processing and incorporates timestamps as a consensus-building factor. It’s PULSE itself that determines which nodes it will communicate with during the process of verifying transaction blocks. When launched, Proof of Signature will be far faster and far more secure than Proof of Stake or Proof of Work. It will also be ecologically beneficial.

Note: XCITE is XTRABYTES’ Desktop Client

Conclusion

While Proof-of-Work is tremendously ingenious, its excessive energy-use requirements make it an unwise choice for the growing cryptocurrency industry. Moreover, its reliance on miners may make it increasingly vulnerable to attack. While Proof-of-Stake appears better in comparison, it maintains a casual approach towards security. Without an incentive for consensus, its approach towards security is ripe for abuse. In contrast, XTRABYTES is both extraordinarily secure and energy-efficient. As its supporters confidently proclaim, it’s the future.