Distributed Ledger

• -All users of the database maintain a copy of the entire system

• Slow to initially download, works on peer-to-peer basis to remain updated
• Each block is cryptographically connected to the previous, making the
ledger permanent and impossible to modify

HASH VALUES
Hash values can be thought of as fingerprints for files. The contents of a file are
processed through a cryptographic algorithm, and a unique numerical value –
the hash value - is produced that identifies the contents of the file. If the
contents are modified in any way, the value of the hash will also change
significantly.
Hashes are used by the blockchain to link every transaction that is recorded in the
ledger.

Proof of Work
The proof of work mechanism ensures that every block in the chain corresponds
with the previous block.

When you want to set a transaction this is what happens behind the scenes:

• Transactions are bundled together into what we call a block;

• Miners verify that transactions within each block are legitimate;
• To do so, miners solve a mathematical puzzle known as proof-of-work problem; HASH
of transaction + previous transaction proof of work = less than a certain
value.
• A reward is given to the first miner who solves each blocks problem;
• Verified transactions are stored in the public blockchain

Very inefficient, wasted energy with every block creation – racing

for solution can require as much power as 1.5 US households use in
a day. Every miner uses this energy to solve the problem, but only
one solution is chosen for the next block, resulting in all the other’s
energy being wasted.

Proof of Stake
Unlike the proof-of-Work, where the algorithm rewards miners who solve mathematical
problems with the goal of validating transactions and creating new blocks, with the proof of
stake, the creator of a new block is chosen depending on its wealth, also defined as stake. The
proof of stake system makes use of users of the system as validators for transactions. Blocks of
transactions are proposed by a “validator”, along with an amount of their own currency
attached as collateral, or a “stake.” The block is voted on by the users of the blockchain. If 2/3
approve of the transactions in the block, the block is added to the chain. If the block of
transactions proposed by the validator contains invalid transactions, and is rejected by more
than 1/3 of the users, the block is rejected, and the validator loses their “stake” as well as
validator privileges. FASTER, MORE EFFICIENT, ENVIRONMENTALLY FRIENDLY

Distributed
Every user maintains an up to date copy of the ledger, which allows for self-verification of
transactions as well as redundancy in the event of network failure.