Will POC mining replace POW mining?

1. Introduction to POC Coin

In 2019, POC projects represented by BHD were very popular in the industry. POC is short for Proof of Capacity, which is a general term for the consensus mechanism of this type of digital currency. A typical feature of digital currencies that use POC as a consensus mechanism is that they use hard disk mining.

Under this consensus mechanism, miners in POC digital currency need to solve a math problem every time they pack a block, just like Bitcoin miners. However, unlike Bitcoin, the answer to this problem is calculated on-site by miners in Bitcoin, while in POC currency, the answer to this problem is stored on the hard disk.

Therefore, in Bitcoin, miners compete on computing power, and computing power is based on electricity consumption, so the biggest cost for Bitcoin miners is electricity. In POC coins, miners compete on who has a larger hard disk space. The larger the space, the higher the probability of storing the answer, and the higher the probability of mining. Therefore, in POC coins, miners compete on hard disk capacity, and hard disks do not consume much electricity, so the consumption of electricity is not large.

2. Brief History of POC Coin Development

Since POC coins do not consume much electricity, they have solved the problem of power consumption in Bitcoin mining to some extent. At the same time, since POC coins only compete with hard drives, such projects claim that as long as there are idle hard drives, they can be used for mining to obtain profits, so they can solve the problem of excessive concentration of Bitcoin mining computing power, which is good news for retail investors.

Because of these two significant features, POC coin was once very popular, but later, especially after July last year, with the sluggish market, the popularity of POC coin gradually faded. At the end of last year, with the launch of the test network of the decentralized storage project Filecoin, the attention of people inside and outside the circle was attracted by Filecoin, and this type of POC project also attracted the attention of some people again because it also uses hard disk mining.

After entering 2020, the popularity of POC began to continue to rise. Some readers came to consult about the POC project. Some cryptocurrency media also began to publish a large number of articles introducing POC, promoting the advantages of the POC mechanism, and even claiming that POC will replace POW.

3. Does POC have any advantages?

The consensus mechanism of POC does seem to solve some of the problems of POW, but does this mechanism have any advantages? I am cautious about this.

The POC project claims that replacing electricity mining with hard disk mining solves the problem of high power consumption in Bitcoin mining, which is indeed true. However, this mechanism itself does not show much advantage.

Although the POC project no longer consumes electricity, the hard disk is used purely to store mining data in this consensus mechanism. However, these mining data themselves do not have much value, so to some extent, the consumption of this hard disk is also a waste. In decentralized storage projects, the consumption of hard disk space is valuable. It is used to store user data and can be downloaded and shared by users. This is the biggest difference between the POC project and the decentralized storage project.

Regardless of the original intention of any digital currency that consumes resources, its mining will become more and more centralized, and the computing power will be increasingly monopolized by a few big players. Since resource consumption is the key to mining, all miners will inevitably compete for resources, and in the end, it will be a competition of financial strength, and powerful miners will monopolize computing power.

Although the POC project claims that idle hard drives can be put into the system to participate in mining, I think if the price of such coins begins to appreciate significantly and a large number of miners join the mining, it will be difficult for small and scattered hard drives to participate in mining to obtain meaningful benefits. It is like now that we use an ordinary computer to mine Bitcoin, which can also participate in mining, but what is the probability of mining coins? Maybe you are lucky and can mine a block in 10,000 years, which is not very meaningful.

Therefore, POC’s claim of being more decentralized than POW is only a temporary phenomenon, and it may still face the problem of computing power centralization in the future.

4. Will POC replace POW?

Some articles claim that POC will replace POW. In fact, it doesn’t matter whether it replaces POW or not.

Nowadays, apart from some old digital currencies such as Bitcoin, Ethereum, Litecoin, etc., there are very few digital currencies that use the POW mechanism, and Ethereum is still planning to abandon the POW mechanism. Therefore, the POW consensus mechanism itself is in decline. Even if there is no POC, it will be difficult for it to become popular again.

So it doesn’t make much sense to talk about whether POC will replace POW.

Now many POC projects focus on comparing energy consumption with Bitcoin and whether mining is decentralized, but I think these are not important. What is important is how can a project surpass Bitcoin in consensus and how can it surpass Ethereum in terms of use value and ecology?

Bitcoin itself does not have much technical advantage and has many problems, but this does not prevent it from becoming the digital currency with the highest consensus. Ethereum is stronger than Bitcoin in terms of function and consensus mechanism, and is more decentralized than Bitcoin, but it cannot replace Bitcoin's consensus. I even think that even after Ethereum 2.0 is realized, when its performance and decentralization far exceed the current Ethereum, its consensus will hardly surpass Bitcoin.

When it comes to functionality, ecology, and decentralization, it is now almost difficult to find a second public chain project that can surpass Ethereum in these aspects.