Researcher’s Proposal: The Bitcoin Mining Revolution
Unsurprisingly, Bitcoin is consuming too much power, especially electricity.
Because Bitcoin mining consumes too much energy, a team of researchers wrote an article proposing a new way to make it less energy-efficient and cheaper. Its new proof-of-work system converts costs from electricity to hardware. Since its inception, Hashcash proof of work has successfully secured the Bitcoin network. Hashcash is a proof of work algorithm, used as a denial of service measurement technique in some systems.
A Hashcash constitutes a proof-of-work that requires a parameterized amount of work to calculate for the sender. The recipient (anyone since it can be publicly checked) can verify the received Hashcash effectively. In 1997, Hashcash was invented by Adam Back. It is most widely used as the Bitcoin mining function at the moment.
Most cryptocurrencies rely on Proof-of-Work (PoW) “mining” against Sybil and dual-spending attacks, as well as a currency issuance mechanism. However, Hashcash PoW has successfully defended the Bitcoin network since its inception. As the network expanded to take on additional transaction volume and store value, Bitcoin PoW’s heavy reliance on electricity created scalability issues, environmental concerns, and systematic risk.
What is the solution? According to a group of researchers, they can ultimately make Bitcoin mining cheaper, fairer and cleaner.
Propose a new proof of work system for Bitcoin
Earlier this month, a proposal for an entirely new system was launched by Michael Dubrovsky (co-founder of the non-profit organization PoWx), Marshall Ball from Columbia University and Bogdan Penkovsky of Paris-Saclay University in France. The proposal focuses on photonic chips, optical computers, and modifications to existing encryption protocols to offset the current dependence on Bitcoin.
Currently, the Bitcoin hash rate is dependent on mining efforts concentrated in low-cost areas, creating unique failure points.
The alternative is what these researchers call “optical proof-of-work” (oPoW). The authors propose a new PoW algorithm, oPoW, to eliminate energy as the main mining cost. The proposed algorithm poses economic difficulties for operators; however, the cost focuses on hardware instead of electricity. The changes will be minimal to the current proof-of-work.
How it works: miners will be encouraged to use technology better. The rapid development and improvement of silicon photons over the past two decades has led to the commercialization of silicon photonic co-processors for low-energy deep learning. These integrated circuits rely on photons instead of electrons for calculation tasks – allowing for low-energy “deep learning”. In addition to providing energy savings, oPoW also has the ability to improve network scalability, enabling external decentralized exploitation.
In the commercial market, oPoW will accurately rely on energy-saving photons to confirm transactions. As a result, mining is cheaper and requires less energy. Mining companies are encouraged to buy photons instead of electricity.
Distribute the cryptocurrency market
Firstly, Bitcoin is currently powered by electricity – but what if the main factor behind profit is hardware? If this is done, there will be a strong ramification for the market as a whole.
China’s oligarchy control over Bitcoin’s current mining farms will be broken by the implementation of such a system. This will move Bitcoin mining out of riskier countries with the cheapest electricity and will instead be based in the countries with the largest technology output. The countries that produce photons are most beneficial.
Secondly, with Bitcoin fuel no longer being electrically powered, the OPOW consensus means that the price reduction of Bitcoin will not necessarily mean a reduction of hash rate.
Lastly, there is a lot of talk about Bitcoin mining companies currently setting up a “price floor”. When oPoW is implemented, we will probably see the exchange fall further if we enter a bearish market. Because the cost will be much less will be the pressure to reduce the price of Bitcoin transactions.
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