I attended the first Texas Bitcoin Conference as an ambassador for the NXT (Nextcoin) community.
During my talk about “How To Eliminate The 2 Biggest Hurdles To Mainstream Adoption Of Bitcoins & Alt Coins“, an audience member asked me what is the difference between NXT’s Proof Of Stake versus Bitcoin’s Proof Of Work I had referenced NXT multiple times in my talk.
What is the difference between “proof of work” and “proof of stake”?
That is a good question.
I’m glad that you brought that up. I had some bonuses here, in case I had time.
A bonus nasty hurdle which is called: “OBJECTIONS”.
When you come out with your product or service you should anticipate in advance what the objections are going to be.
So one of the things that we ran into with NXT is that there’s no mining, there’s only forging. There’s no mining and the difference is this, forging does not produce new coins. So a billion coins was created from the day the source code was released.
There was an “IPO” basically and if you sent in your bit coins then you got an X amount of that is proportionate to the percentage you put in depending on how many bitcoins you sent in to the inventor, BCNxt.
How many of you guys think that it’s risky sending some guy in Russia or somewhere some of your bitcoins.
Everybody agree that it’s risky? And if you are willing to take that chance, shouldn’t you be rewarded?
So, now those original seventy-three people that sent a Bitcoins and then the software, the original source code got developed and each original investor got a portion, their percentage of the 1 billion original NXT coins, so because of that, a lot of people assume that it’s pre-mined even though there’s no mining involved, there’s only forging.
Proof Of Work
And Proof Of Stake
The difference between proof of work in Bitcoin versus the proof of stake in NXT is that in bitcoin you spend your money to buy GIGA hashes of computing power to hash the Bitcoin and secure the BITCOIN network.
The NXT cryptocurrency uses a proof of stake because they discovered that not everyone can go out and buy a BITCOIN miner.
Can anyone here afford a $4,000, $5,000, or $25,000 BITCOIN miner?
Not everyone in this room can, but everyone in this room can afford a dollar, right, or fifty-cents or ten cents to get a stake.
And the amount of stake that you have in the NXT network will allow you the ability to forge and secure the network and you get compensated by the transaction fees.
Now once again, as I’ve mentioned earlier about BITCOIN mining, if that’s not your specialty, you should not worry about that, it’s securing the network. If security is not your expertise, leave that up to the people that are good at it, okay, and just be a user.
So basically proof of work depends upon how many GIGA hashes you have and proof of stake depends upon how many coins you have.
Now a lot of people complain like that because they feels those pre-mined but you are going to spend money to buy those giga-hashes or you can spend money to buy the coins.
In bitcoin the more giga-hashes you have more mining ability.
In the world of NXT, the more NXT coins you, the more that you can forge (process NXT transactions).
Does that help answer your question?
The proof of stake makes it more fair for everyon. A lot of people don’t think it’s fair because they’re just strictly there to mine for bitcoins.
The inventor of NXT did not want groups of people with money to run over to NXT, mine it and then as soon as another alternative currency like doge coin comes out.
These “nomadic” miners (processors) will take all their equipment and run over to a different alternative coin and mine that and then the new old coins comes out and take all their hardware. We wanted a more stable and secured network.
So when a new alt coin omes out, you’re not going to take your million NXT coins and run over there and try to mine them, it’s going to be used to forge (mine) NXT only.
Forging NXT can be done on a computer, it can be done on a regular smart phone, it can be done by anybody.
The purpose on the proof of stake was to eliminate a centralized mining process or a centralized area where they secure the network.
By using the proof of stake algorithm, everyone across the NXT community can secure the network no matter what type of computer or hardware that they have.
You can get some free complimentary Nextcoins (NXT) here:
Let me know what you think.
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