BitcoinPoS Review: A Solution to Bitcoin’s Centralization Problem
Bitcoin’s popularity has demonstrated the efficiency of blockchain technology in solving economic issues, including centralization and fraud. That’s because blockchain technology has gained widespread application in several sectors, including finance, banking, supply chain, etc.
But while Bitcoin has brought many pleasantries in the fintech industry, the king crypto faces some challenges which compromise its usability. Bitcoin leverages Proof-of-Work (PoW) consensus algorithm, which has some downside – its slow, costly to mine, harmful to the environment, open to 51% attacks, and resistant to scalability. These challenges significantly hinder the mainstream adoption of Bitcoin despite being the leading cryptocurrency in terms of value and market capitalization.
BitcoinPoS seeks to solve Bitcoin’s major challenges by integrating its assets with a highly efficient, scalable, and flexible proof of stake consensus algorithm. BitcoinPoS takes after Bitcoin in every way but leverages an advanced blockchain technology to make Bitcoin more usable and better. In clarity, BitcoinPoS is just Bitcoin with proof of stake consensus.
Here is a comprehensive review on Bitcoin Proof of Stake or BitcoinPoS
Price (at the time writing): $95.67 USD
Max Supply: 21 million
Market Cap: $333,928,595 USD
Circulating Supply: 3,490,521 BPS
Total Supply: 3,701,975 BPS
Block generation rate: 3 minutes
Initial block reward: 50 BPS/block
Current block reward: 6.25 BPS/block
Coin Maturity: 500 blocks
Block reward: Reduced by 25% every 700k blocks
Estimated TPS: 21 transactions/second
Launched on the 2nd of May 2020, Bitcoin Proof of Stake (BitcoinPoS) is a peer-to-peer network with no central authority and enables instant payments to anyone, anywhere in the world. BitcoinPoS runs on an open-source software referred to as BitcoinPoS Core.
BitcoinPOS Core combines Bitcoin Core and Proof of Stake consensus making the network scale better, consume less power, and make mining less demanding and cumbersome. Like Bitcoin, BitcoinPoS (BPS) has a total supply capped at 21 million BPS with a similar issuing rate. However, the BitcoinPoS network doesn’t support mining. Instead, new coins are created by stakers who are rewarded. The block rewards are cut once every four years by 25% every 700k blocks. This is contrary to BTC, where block rewards are cut by half (50%) every four years in an event called Bitcoin halving.
BitcoinPoS Network Architecture
BitcoinPoS architecture is similar to Bitcoin’s only that the consensus algorithms are different. BitcoinPoS employs proof of stake instead of proof of work in Bitcoin. The network is a peer to peer (P2P) with no single controller or server node. Each node plays an equal role in providing & consuming services on behalf of users. The network nodes interconnect in a mesh network with a “flat” topology. There is no server, no centralized service, and also no hierarchy within the network.
BitcoinPoS is not a Bitcoin chain fork. Rather it’s an original implementation of the Bitcoin codebase with several adjustments to enhance the coin’s usability, especially in financial applications such as payments.
BitcoinPoS is not mined but staked. Staking ensures that sufficient coins are held in the wallet to support the operations of the blockchain network. The requirement for staking BPSs are as follows:
- The coins to be staked need to be compatible address/transaction types. Only P2PK and P2PKH are currently supported.
- The coins to be staked need to be matured; this means that the unspent outputs (UTXO) need to have a depth in the main chain at least the 500 blocks.
BitcoinPoS transactions are similar to Bitcoin. They are built on the basis of public and private key signatures – a private key is signed by the sender, and a public key is verified. Unlike Bitcoin’s PoW consensus, BPS’s proof of stake incentivizes staking every fork.
Incentivizing staking secures the network against double-spend attacks and makes transactions smooth and fast.
To protect the network against malicious actors, BitcoinPoS also employs the Mutualized Proof of Stake consensus (MPoS). In MPoS consensus, network participants share the transaction fees instead of the fees being given to a single block creator. Fee sharing significantly reduces the chances of occurrence of a spam attack. Therefore, it’s almost impossible to spam the BPS network with fees.
Block Time and Rewards
BitcoinPoS block time is set at 3 minutes, making it three times faster than Bitcoin and handling more than three times the number of transactions. The block difficulty is determined by an algorithm based on exponential adjustments with difficulty being adjusted at every block.
For the block rewards, they are split as follows:
- Blocks 0 to 40000 have a reward of 50 BPS
- Blocks 40000 to 80000 have a reward of 25BPS
- Blocks 80000 to 120000 have a reward of 12.5 BPS
- At block 120001, the BPS and Bitcoin reward/block are aligned at 6.25 BPS
- The blocks from 0 to 5000 are proof of work blocks, premined by the developers; these funds will be allocated for continued development and maintenance of BitcoinPoS
Advantages of BitcoinPoS over Bitcoin
While Bitcoin is a decentralized P2P network, its PoW consensus brings about centralization due to its dependency on electricity and also mining hardware. Bitcoin encourages the centralization of mining resources in the sense that mining hardware and electricity are extremely costly.
There are a few people with access to these resources, which monopolizes or centralizes the Bitcoin mining industry, locking out regular miners. Big companies now control most Bitcoin mining operations since they have enough resources to invest in performant mining rigs
BitcoinPoS leverages Proof-of-Stake consensus, which doesn’t require energy in high quantities. Also, all users can stake coins, therefore, encouraging participation from all more people and decentralization of the network.
Invulnerable to 51% Attacks
Proof-of-Work consensus makes Bitcoin vulnerable to 51% attacks where one entity controls over 50% of the network hashrate. BPS is invulnerable to 51% attacks thanks to the Mutualized Proof of Stake consensus, which is almost impossible to control by an attacker. The network is powerfully secure with a huge number of full nodes to enhance decentralization.
Bitcoin’s PoW creates a massive strain on the environment and greatly contributes to global warming. The PoS consensus is a more environmentally friendly algorithm and can alleviate environmental damage. For instance, it cuts on power consumption by 99% since new coins are issued without the need to solve complex algorithms that are energy-consuming.
Low Transaction Fees and Fast Payments
Unlike Bitcoin, Bitcoin Proof of Stake – BPS, offers low fees with transactions flowing without congestions. Also, users can instantly send & receive digital currency payments on a highly scalable network.
BPS is universally accessible and can easily be staked by all people using a laptop or PC. Users can send money globally almost instantly with a few clicks.
How to Earn PoS Rewards
- Download Wallet – Download the BitcoinPoS wallet
- Get BitcoinPoS – You can get BitcoinPoS by using the website exchange functionality or your favorite exchange
- Stake Coins– Stake your BitcoinPoS coins
- Earn Rewards– Get rewarded based on staked BitcoinPoS
Bitcoin Proof of Stake could be an improved version of Satoshi’s Bitcoin with its several performances and consensus upgrades. The coin isn’t into any form of competition with Bitcoin. Instead, it’s looking to revamp the properties of Bitcoin with its superior consensus algorithm, reduced centralization, easily facilitated payments, and significantly reduced power consumption requirements. It’s safe to say that BitcoinPoS can offer better real-life digital currency payments for mainstream crypto adoption.