BCT

unit-2
What is Decentralization in Blockchain?
 Blockchain decentralization refers to the distribution of power and authority across a network of
computers or nodes that collectively maintain and validate a blockchain.
 Decentralized blockchain technology aims to eliminate the need for a central authority by allowing
multiple participants to maintain the system collectively.
 In a decentralized blockchain network, each node has a copy of the entire blockchain and
participates in the consensus mechanism to validate and verify transactions.
 This consensus mechanism ensures agreement among the nodes about the validity and order of
transactions, promoting trust and security within the network.
Advantage of Decentralization in Blockchain:
 Security: As the data is distributed across multiple nodes, it becomes challenging for malicious
actors to manipulate or compromise the system.
 Transparency: Blockchain’s decentralized nature enables transparency as anyone on the network
can view the transaction history and verify its integrity. This transparency can foster trust among
participants.
 Trustlessness: Decentralization reduces the need for trust between participants, as the consensus
mechanism ensures the accuracy and validity of transactions. Participants can rely on the
blockchain’s mathematical protocols and smart contracts rather than relying on trust in a central
authority.
 Ownership and control: By eliminating intermediaries, decentralization allows individuals to have
direct ownership and control over their assets and data.
Disadvantages of Decentralization in Blockchain
• Scalability: Decentralized blockchains often face scalability issues due to the need for all nodes to
validate and store the entire transaction history. As the network grows, the computational and
storage requirements increase, which can lead to slower transaction processing times and increased
resource demands.
• Governance and Decision-Making: Decentralized blockchains typically involve a distributed
community of participants who collectively make decisions through consensus mechanisms.
However, achieving consensus on critical issues can be challenging and time-consuming.
Disagreements may arise, leading to conflicts within the community.
• User Experience and Responsibility: Decentralized blockchains often require users to manage
their private keys and handle their own security. This responsibility can be complex and
burdensome for non-technical users, leading to potential risks such as loss of funds if private keys
are lost or stolen.
• Upgrade and Protocol Changes: Implementing changes or upgrades in a decentralized
blockchain can be challenging due to the need for consensus among network participants. This can
result in slower development cycles and delays in adopting necessary improvements.
How is Blockchain Decentralized?
• Blockchain decentralization is achieved through its underlying technology and network
structure. Here are some key elements that contribute to the decentralization of a
blockchain:
• Distributed Ledger: The blockchain’s ledger, which contains a record of all
transactions, is replicated and stored across multiple nodes in the network. Each
participating node maintains a complete copy of the blockchain, creating a
distributed ledger that is synchronized through consensus mechanisms.
• Consensus Mechanisms: Decentralized blockchains utilize consensus
mechanisms to agree on the validity and order of transactions. Consensus
mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS), involve a
majority of network participants coming to a consensus on the state of the
blockchain. This consensus ensures that all nodes have an equal say in validating
transactions, avoiding the need for a central authority.
• Peer-to-Peer Network: Blockchain networks operate on a peer-to-peer (P2P)
network architecture, where participants connect directly with each other without
the need for intermediaries. Each node communicates with other nodes to
propagate transactions and blocks, maintaining the integrity and consistency of
the blockchain.
• Decentralized Governance: Some blockchain networks employ decentralized
governance models, where decisions regarding protocol upgrades, changes, and
improvements are made through a consensus-driven process. This allows
stakeholders in the network to have a say in the governance of the blockchain,
reducing the centralization of power.
• Immutability and Cryptographic Security: The use of cryptographic
algorithms ensures the integrity and security of data stored on the blockchain.
Once a block is added to the chain, it becomes extremely difficult to alter past
transactions without consensus from the majority of participants. This
immutability protects the integrity of the blockchain and prevents tampering or
manipulation.
• By combining these elements, blockchain decentralization and a trustless
system is being achieved, where no single entity or authority has control over
the network. Instead, power is distributed among participants who collectively
maintain and secure the blockchain.
Methods of decentralization
Two methods can be used to achieve decentralization: disintermediation and competition.
1) Disintermediation
• The concept of disintermediation can be explained with the aid of an example. Imagine that
you want to send money to a friend in another country. You go to a bank, which, for a fee, will
transfer your money to the bank in that country. In this case, the bank maintains a central
database that is updated, confirming that you have sent the money. With blockchain
technology, it is possible to send this money directly to your friend without the need for a
bank. All you need is the address of your friend on the blockchain. This way, the intermediary
(that is, the bank) is no longer required, and decentralization is achieved by disintermediation.
2)Contest-driven decentralization
• In the method involving competition, different service providers compete with each other in
order to be selected for the provision of services by the system. This paradigm does not achieve
complete decentralization. However, to a certain degree, it ensures that an intermediary or
service provider is not monopolizing the service. In the context of blockchain technology, a
system can be envisioned in which smart contracts can choose an external data provider from a
large number of providers based on their reputation, previous score, reviews, and quality of
service.
• This method will not result in full decentralization, but it allows smart contracts to make a free
choice based on the criteria just mentioned. This way, an environment of competition is
cultivated among service providers where they compete with each other to become the data
provider of choice.
 Scale of decentralization

• There are many benefits of decentralization, including transparency, efficiency, cost saving,
development of trusted ecosystems, and in some cases privacy and anonymity. Some challenges,
such as security requirements, software bugs, and human error, need to be examined thoroughly.
• For example, in a decentralized system such as Bitcoin or Ethereum where security is normally
provided by private keys, how can we ensure that an asset or a token associated with these
private keys cannot be rendered useless due to negligence or bugs in the code? What if the
private keys are lost due to user negligence? What if due to a bug in the smart contract code the
decentralized application becomes vulnerable to attack?
• In the following diagram, varying levels of decentralization are shown. On the left side, the
conventional approach is shown where a central system is in control; on the right side, complete
disintermediation is achieved, as intermediaries are entirely removed. Competing intermediaries
or service providers are shown in the center. At that level, intermediaries or service providers
are selected based on reputation or voting, thus achieving partial decentralization:
 Routes to decentralization
• The Bitcoin blockchain is typically the first choice for many, as it has proven to be the most resilient and secure
blockchain and has a market cap of nearly $166 billion at the time of writing.
• Alternatively, other blockchains, such as Ethereum, serve as the tool of choice for many developers for building
decentralized applications.
• Compared to Bitcoin, Ethereum has become a more prominent choice because of the flexibility it allows for
programming any business logic into the blockchain by using smart contracts.

How to decentralize
The framework raises four questions whose answers provide a clear understanding of how a system can be decentralized:

1. What is being decentralized?

2. What level of decentralization is required?

3. What blockchain is used?

4. What security mechanism is used?

• The first question simply asks you to identify what system is being decentralized. This can be any
system, such as an identity system or a trading system.
• The second question asks you to specify the level of decentralization required by examining the scale
of decentralization, as discussed earlier. It can be full disintermediation or partial disintermediation.
• The third question asks developers to determine which blockchain is suitable for a particular
application. It can be Bitcoin blockchain, Ethereum blockchain, or any other blockchain that is deemed
fit for the specific application.
• For example, the security mechanism can be atomicity-based, where either the transaction executes in
full or does not execute at all. This deterministic approach ensures the integrity of the system.
• In the following section, let's evaluate a money transfer system as an example of an application
selected to be decentralized.
Decentralization framework example
The four questions discussed previously are used to evaluate the decentralization requirements of this
application. The answers to these questions are as follows:
1. Money transfer system
2. Disintermediation
3. Bitcoin
4. Atomicity
Money transfer system

Blockchain in money transfers operates on key principles: cryptography, decentralization, and

consensus. To illustrate, when a sender initiates a money transfer, the details are broadcasted to a
network of computers, also called nodes. Using cryptographic algorithms, these nodes validate the
transaction.
Disintermediation
• Disintermediation is the investment magnet for blockchain-related ideas, riding on the success of the
business and underpinned by peer-to-peer and crowdsourcing models. The promise of blockchain for
enterprise goes beyond its role as an industry disruptor.
 Bitcoin
• The blockchain is a computerized record framework that records exchanges across numerous PCs so
that the enlisted exchanges can't be modified retroactively. This innovation was created to help the
virtual cash bitcoin; however, it has numerous applications.
 Atomicity
• Atomic—The atomic property implies that a transaction is an indivisible unit of execution that either
completely performs its designed function or else its effect on the database is as if the transaction
never began; that is, the database state an atomic transaction leaves if the transaction does not totally
commit.
• The responses indicate that the money transfer system can be decentralized by removing the
intermediary, implemented on the Bitcoin blockchain, and that a security guarantee will be provided
via atomicity.
• Atomicity will ensure that transactions execute successfully in full or do not execute at all. Similarly,
this framework can be used for any other system that needs to be evaluated in terms of
decentralization.
• The answers to these four simple questions help clarify what approach to take to decentralize the
system.
• To achieve complete decentralization, it is necessary that the environment around the blockchain also
be decentralized.
DAO(Decentralized Autonomous Organization) in Blockchain
• Most companies that we know are centralized. They are not transparent and are controlled by a few
powerful people. So they control the property through a legal system.
• If we want to change that, we need a decentralized organization. Thus, they are based on the
Blockchain. As a result, we can get rid of the old centralized structure.
• A DAO is a company that operates almost completely autonomously on a blockchain. There is no
hierarchical management system like in traditional companies.
• DAO’s are defined with the help of Smart Contracts. Thus, they allow us to implement processes,
rewards, and rules via source code.
• The network keeps a record of all members in order to define the rights of each person. The
blockchain stores all this information.
• So, this enables a DAO to make its own decisions. We only need employees for administrative tasks.
• If we want to change the strategic direction of our company, we only need to change the source code.
As a result, we can create a highly efficient, transparent, autonomous and secure virtual company.
How does a Decentralized Autonomous Organization work?

• In order for a DAO to work we first need rules. They are important to create security.
We can define the rules in the code using Smart Contracts. The consensus
mechanism ensures that everyone follows our rules.
• In a decentralized autonomous organization, every action is a transaction. That
means, for example, if you want a higher salary, that implies a transaction.
• Each transaction is a vote. This vote is represented by a token. Smart Contracts
execute the token. As a result, your request for a salary increase is displayed on the
DAO.
Everyone who owns a token can now vote for or against your proposal. If you get the majority, you
get more money.
Here, each wallet address represents one employee. Every employee owns a certain number of
tokens. Thus, the more tokens you own, the more weight your vote has.
Decentralized Autonomous Organization Example

• For example, the social media platform Steemit operates through a DAO. You get money for
creating content to attract attention.
• Thus, the whole system works decentralized. Therefore, it has even more potential then Reddit.
Attributes of DAO’s
• Smart contracts define a decentralized autonomous organization. But a good organization also needs
liquid funds.
• It needs to make good decisions and communicate with all instances. Today DAO´s have the following
attributes:
Autonomous:
• All parts have to be implemented through smart contracts on a blockchain. It’s also open-source. So that
means you can trust them. You also have to make sure that there is no central instance. So we can use
autonomy to be more efficient.
Tokens:
• To reward certain actions, a DAO needs an internal property that is valuable. When you create a DAO, a
funding takes place. So they do not have a hierarchical structure or management.
Employee:
• Before we can create a DAO, we need some people to help fulfill
certain tasks. These are mainly administrative tasks.
Proposals:
• In order to develop a DAO, we have to make decisions towards
the future. We make these decisions democratically.
• Thus, if 51% of the members agree the proposal will be accepted.
As a result, you can save a lot of time and money.
• Also, a DAO can use that money to prevent people from
spamming the network.
Voting:
• After passing in a proposal, the actual voting takes place. This takes place demographically and if
51% agree, the proposal is considered as approved. Since a DAO runs on the blockchain, you can
trust the result of the vote.
Transparency:
• All processes have to be transparent for all members. Thus all can join in and work in the same case.
The blockchain captures everything. So a DAO can’t be changed or manipulated.
Consensus:
• On a DAO, we vote on everything together. So even if you find bugs in the code, they can only
change it when the voting has taken place. When we reach consensus, then the blockchain executes
our decision.
Advantages and Disadvantages of DAO
• We have an organization that is able to reduce their costs to a
minimum. It does this through a fast and simple decision making.
• Thus, we don’t need any employees to fulfill administration tasks.
This reduces the complexity a lot. As a result, you do not need
any office. You can work distributed from all over the world and
reach your full potential.

Disadvantages. :
• A disputed point is trust. People develop smart contracts. Therefore, you
can have errors. We do have to trust them to do their job correctly. One
mistake can lead to the failure of the system. Thus, the whole trust lies in
the code.
Disributed systems
• Distributed systems are a computing paradigm whereby two or more nodes work with each other in
a coordinated fashion in order to achieve a common outcome and it's modeled in such a way that
end users see it as a single logical platform.
• A node can be defined as an individual player in a distributed system. All nodes are capable of
sending and receiving messages to and from each other.
• Nodes can be honest, faulty, or malicious and have their own memory and processor.
• A node that can exhibit arbitrary behavior is also known as a Byzantine node.
• This arbitrary behavior can be intentionally malicious, which is detrimental to the
operation of the network.
• Generally, any unexpected behavior of a node on the network can be categorized as
Byzantine. This term arbitrarily encompasses any behavior that is unexpected or
malicious:
• Design of a distributed system; N4 is a Byzantine node, L2 is broken or a slow
network link.
• The main challenge in distributed system design is coordination between nodes and fault tolerance.
Even if some of the nodes become faulty or network links break, the distributed system should tolerate
this and should continue to work flawlessly in order to achieve the desired result.
• This has been an area of active research for many years and several algorithms and mechanisms has
been proposed to overcome these issues.
• Distributed systems are so challenging to design that a theorem known as the CAP theorem has been
proved and states that a distributed system cannot have all much desired properties simultaneously.
CAP theorem :This is also known as Brewer's theorem.
The theorem states that any distributed system cannot have Consistency, Availability, and Partition
tolerance simultaneously.
Consistency is a property that ensures that all nodes in a distributed system have a single latest copy of
data.
Availability means that the system is up, accessible for use, and is accepting incoming requests and
responding with data without any failures as and when required.
Partition tolerance ensures that if a group of nodes fails the distributed system still continues to operate
correctly.
Distributed Ledger Technology (DLT)
• Distributed ledger technology allows you to update records, validate them and access them from
anywhere. This record can be stored on a network spread across multiple different systems and physical
locations. Unlike traditional databases, distributed ledgers are not stored in a single place. Therefore,
there is no single point of failure in a DLT system.
• DLT eliminates the need for a trusted central authority by creating a trustless system. Every individual
using the ledger can see the changes transparently made by all other users. There is no need for an entity
to control the ledger as it is controlled by its users.
How do distributed ledgers work?
• DLT works based on principles of decentralization. Unlike traditional centralized databases, DLT
operates on a peer-to-peer (P2P) network, where multiple nodes store, validate and update the
ledger simultaneously. This eliminates the need for a central authority and reduces the risk of a
single point of failure.
• The process begins with the replication of digital data across the network of nodes. Each node
maintains an identical copy of the ledger and independently processes new update transactions. To
ensure consensus, all participating nodes employ a consensus algorithm that determines the correct
version of the ledger. Once a consensus is reached, the updated ledger is propagated to all nodes,
ensuring synchronization and accuracy.
• DLT uses cryptography to securely store data and cryptographic signatures and keys to allow access
only to authorized users. The technology also creates an immutable database, which means
information, once stored, cannot be deleted and any updates are permanently recorded for posterity.
• This architecture represents a significant change in how information is gathered and communicated
by moving record-keeping from a single, authoritative location to a decentralized system in which
all relevant entities can view and modify the ledger. As a result, all other entities can see who is
using and modifying the ledger. This transparency of DLT provides a high level of trust among the
participants and practically eliminates the chance of fraudulent activities occurring in the ledger.
• As such, DLT removes the need for entities using the ledger to rely on a trusted central authority
that controls the ledger or an outside, third-party provider to perform that role and act as a check
against manipulation.
Distributed ledger technology consensus mechanisms
Consensus mechanisms play a critical role in ensuring the integrity and security of distributed
ledger technology. These mechanisms determine how transactions are approved and added to the
ledger. Some of the most common consensus mechanisms are the following.

Proof of work
• Proof of work (PoW) is the consensus mechanism that underpins the Bitcoin blockchain. In PoW,
miners compete to solve complex mathematical problems to validate transactions and create new
blocks. This process requires significant computational power, making it resource-intensive and
energy-consuming. However, PoW ensures the security and immutability of the blockchain
network.
Proof of stake
• Proof of stake (PoS) is an alternative consensus mechanism that aims to address the energy
consumption and scalability issues associated with PoW. In PoS, validators are chosen to validate
transactions based on the number of tokens they hold and are willing to stake as collateral. This
mechanism reduces the need for extensive computational power and rewards participants based
on their stake in the network. Ethereum is the largest PoS cryptocurrency.
Directed acyclic graph
• DAG is a nonlinear data structure that is gaining popularity as a consensus mechanism in
distributed ledger technology. Instead of relying on blocks and chains, like traditional
blockchains, DAG organizes transactions in a graphlike structure. This enables faster
transactions, increased scalability and improved efficiency. Examples of DAG-based
cryptocurrencies include IOTA and Hedera Hashgraph.
WHAT IS THE MERKLE ROOT?
• A straightforward mathematical technique for verifying
Merkle tree data is called a Merkle root.
• In the case of cryptocurrencies, it serves as a means of
ensuring that data blocks sent across a peer-to-peer network
are complete, undamaged, and unaltered.
• It is essential to the computation needed to maintain the
functionality of cryptocurrencies like bitcoin and ether.
• As seen in the diagram above, the Merkle root of the Merkle
tree is the topmost node.
HOW MERKLE TREES WORK
• A Merkle tree adds up all of the transactions in a block and creates a unique digital fingerprint of
the full set of instructions, allowing the user to check whether the block contains a transaction.
• Merkle trees are created by continuously hashing pairs of nodes until only one hash remains,
known as the root hash or Merkle root.
• They’re designed from the ground up, with transaction IDs (hashes of individual transactions) as
the foundation.
• Every non-leaf node hashes its prior hash, and every leaf node in the Merkle tree hashes
transactional data.
Take a look at a Merkle tree in blockchain as an example to better grasp the idea.
• Consider the case below: Four transactions are done on the same block: A, B, C, and D.
• After that, each transaction is hashed, giving you: Hash A, Hash B, Hash C, and Hash D.
• When these hashes are combined, they form a new hash: Hash AB and Hash CD
• As a result, the Merkle root is made up of combining these two hashes: Hash ABCD
BENEFITS OF MERKLE TREES
Merkle trees have four main benefits:
• Validation of the integrity of data – It may be used to effectively validate the data’s integrity.
• It uses a small amount of disc space – The Merkle tree takes up extremely minimal disc space
relative to other data structures.
• Networks with little data – For verification, Merkle trees can be split down into little chunks of
data.
• Quick and simple verification – The data set is compact, and validating the integrity of data takes
only a few seconds.
WHY IS THE MERKLE TREE SO IMPORTANT IN BLOCKCHAIN?
• Consider a blockchain without Merkle trees to see how important they are to the system. Let’s start
with an example of the Bitcoin blockchain because it makes use of Merkle trees, which makes it
easier to understand.
• Without Merkle trees, every node on the Bitcoin network would have to store a complete record of
all Bitcoin transactions ever made. You can imagine how much information would be included in
it.
• Any authentication query on Bitcoin would require a large amount of data to be sent over the
network; as a result, you’d have to verify the data yourself.
• To compare ledgers and certify that there have been no changes, a validation system would require
a lot of computer capacity.
• Merkle trees are an answer to this problem. They separate the evidence of data from the data itself
by hashing records in accounting.
• It demonstrates that sending little quantities of data across a network is all that’s needed for a
transaction to be legitimate.
• It allows you to show that in terms of notional computing power and network bandwidth, both ledger
types are identical.
Structure of a Block in Blockchain
 Block in Blockchain
• A block is actually the building block or the key element of a blockchain.
• The definition of a blockchain is based on its blocks. A blockchain is a chain of multiple
blocks.
• Blocks contain transactions. Each block contains a different number of
transactions.
• These transactions are contained in blocks so that they would be added
to the distributed ledger.
• The number of transactions is limited by the block size and gas limit.
Generally, the block contains more than 500 transactions.
• Other than transactions, a block also consists of some metadata. This
metadata is stored in the header of the blockchain.
• The size of a block header is 80 bytes.
Parent Block in Blockchain
• As the blocks are linked together one after the other, they have a parent-child relationship.
• Each block is the parent of the upcoming block.
• Each child block contains the hash of the previous block i.e., its parent block.
• The first block of the blockchain is called Genesis Block and it has no parent. The block
contains different fields which can be roughly categorized as listed below:
• The block size: The size of this field is 4 bytes and it contains the size of the block.
• The block header: The size of a block header is 80 bytes. It further contains different fields.
• The transaction counter: This field contains the number of transactions and the size of it is
between 1-9 bytes.
• The transactions: This field contains transactions of the block and its size is variable.
Block Header in Blockchain
The header of an Ethereum block contains different fields of metadata which are listed below.
• Hash of the previous block: Every block header gives information about the previous or parent block.
This field contains the hash value of the previous block and this reference connects all the blocks. The
size of this field is 32 bytes.
• Version: This field stores the version number to show software upgrades. The size of the version field is
4 bytes.
• Difficulty: The mining difficulty at the time of the block creation is stored in this field. The concept of
mining would be explained in the upcoming articles. Its size is 4 bytes.
• Timestamp: This field contains the time at which the block was created. The size of this field is 4 bytes.
• Nonce: A nonce is a value used during the mining of the block. This field’s size is also 4 bytes.
• Merkle tree root: A Merkle tree is a structure obtained from hashing the transactional data of a block.
The root of this tree is stored in the block header under this field. 32 bytes is the size of the Merkle tree
root field.
Properties of a Block
Difficulty Property:
• This property gives the difficulty level of solving the puzzle to mine the block.

Total Difficulty Property:

• This property of the block tells us the total difficulty of the blockchain.
GasLimit Property:
• This property tells us the maximum gas allowed by the block which in turn tells us about the number of
transactions that the block can accommodate.
GasUsed Property:
• The gasUsed property gives the amount of gas used by the block for executing all of its transactions.

Number Property:
• The number shows the block number in the list of blocks.

Transactions Property:
• This means all of the transactions contained in the block.
Hash Property:
• This property shows the hash of the block.

ParentHash Property:
• This property saves the hash of the previous block.

Nonce Property:
• Nonce property shows the nonce value. It is a variable used in mining the block.

Miner Property:
• The miner property gives information about the miner of the block. This gives the account of the
block miner.
Block Identification:
The blocks of a blockchain need an identification to refer them or distinguish them from other blocks. Two
parameters are used for this purpose which are given below:
1. Block Hash
• Block hash is the main identification parameter of a block. This value is obtained by cryptographic
hashing of the header of the block.
• The hashing operation is performed twice. The header of the block contains metadata of the block and
when this data is hashed the result is the block hash, whose size is 32 bytes.
• The hash of the block is not stored in the block’s data whether the block is being transmitted to the
other nodes or it is stored as part of the blockchain on some node. When a node receives a block from
the network, it computes its hash itself.
2. Block Height
• The second parameter used for identifying a block is its height. The blocks are linked together in a
list type structure starting from the genesis block.
• The genesis block is given a height 0 zero. The second block in the blockchain or the first block
after the genesis block is at height 1 and so on.
What Is The Meaning Of Consensus?
• Consensus means that the majority of a group has agreed in favour of a decision. When it comes to
blockchain, reaching a consensus is important. At least 51% of the traders and miners associated with a
particular coin must agree to finalise the next global status of the coin.

What Is A Consensus Mechanism?

• In the blockchain, a consensus mechanism is a system that validates a transaction and marks it as
authentic. This mechanism lists all valid transactions of a coin in a blockchain to build trust in the coin
among traders. Several currencies, such as Bitcoin, Ethereum etc., use this system for security purposes.
What Are The Types Of Consensus Mechanisms?
Several mechanisms are used as a consensus mechanism during coin trading. These mechanisms are as
follows:
Proof of Work
• ‘Proof’ refers to the solution of a highly-complex problem, and ‘work’ refers to the process of
solving the same. Crypto coin miners compete to solve the problem and gain the right to process the
transaction. The fastest solver receives a mining fee from the traders of these coins.
• This mechanism tracks and verifies the creation and transactions across blockchain networks. It
enables miners by allowing them to validate new transactions and is extremely secure. However, it
has several cons, such as high electricity requirements and difficulty for individual miners.
Proof of Stake
• This mechanism randomly chooses a maximum coin owner to validate a transaction. It also allows the
owner to create a block for the same coin. This mechanism requires comparatively less energy,
transaction time and a lower fee. Coins like Etherium 2.0, Polkadot, Cosmos, Cardano, ThorChain, Nxt
and Algorand use this mechanism extensively. There is a security risk as if an owner owns 51% or more
coins of a particular coin, then that person will get sole ownership of its network.
Proof of Burn
• PoB aims to improve the quality of blockchain so that it can be used easily and extensively as a tool for
faster and more secured transactions. After PoW and PoS, PoB is designed to prevent fraud activities on a
blockchain network. Cryptocurrencies such as Bitcoin use this mechanism to offer secure transactions to
traders.
Proof of Elapsed Time
• Intel Corporation created this mechanism to permit blockchain to decide the person who will create the
next block. It uses a lottery system to decide the next block creator. Thus, it gives a fair chance to all
traders to create the next block. It is an efficient process involving utilising lesser resources and low
energy consumption.

Proof of Activity
• This mechanism is a combination of both Proof of Work and Proof of Stake. It has been designed to
combine the best features of PoW and PoS. In the beginning, the Proof-of-Activity mechanism functions
like PoW. Once a new block is completed, it starts to function like a Proof-Of-Stake mechanism. Coins
such as DCR (Decred) use this mechanism.
Proof of Concept (PoC):
• It will help you get a clear idea of what you’re doing before you even get started. Furthermore, proof
of concept in the blockchain space is not just for exploring the market for ideas. Moreover, you won’t
be able to determine the best way to start the production process. Instead, you’ll work on your
possible blockchain solution option and see if it’s likely to materialize.
• In the context of cryptocurrencies and blockchain technology, Proof of Concept (PoC) refers to a
demonstration or test implementation that demonstrates the practicality and functionality of a new
cryptocurrency, the blockchain protocol, or a specific feature in the blockchain network. This is a
preliminary stage in the development process to provide evidence that a particular concept or idea
can be effectively implemented.