PoW may seem obsolete, but innovation does not stop

Author: Hacash Enthusiast

The new PoW project Kaspa has performed well recently. In just one year, it has surpassed a hundred-fold increase, and its market value has entered the top 50. A PoW coin surpasses many star projects, which makes people wonder why PoW, a seemingly outdated mechanism, can be so eye-catching?

There are two common explanations:

• Bear market looks at PoW
• After Ethereum transfers PoS, the remaining computing power needs to find a new bearer

These two points of view are generally correct from a macro perspective, but after careful consideration, you will find that it is not that simple.

Bear market looks at PoW

"Looking at PoW in the bear market" is a summary of industry consensus. But behind this sentence actually means that under the conditions of a bear market, the most important funds will be withdrawn from targets driven only by narrative, and the remaining funds will be gathered on targets with objective value evaluation standards, while the output of PoW coins is due to It needs to consume electricity and has objective value support**. But when the bull market comes, because PoW lacks innovations at tipping points such as ICO, DeFi, and governance, other new narrative-driven projects will gain the upper hand.

The development of PoW has been 14 years since the birth of Bitcoin, and it has become the air and water of the industry. Everyone is accustomed to PoW, and PoW has not made everyone shine for a long time. Only when there are various problems in the industry and various new "IXO" projects prove to be unfeasible, will everyone pay attention to PoW again.

Therefore, behind the saying "Looking at PoW in a bear market" not only means that PoW has the meaning of objective value, but also means that the innovation of PoW in the encryption industry is seriously insufficient. As long as there are some innovative projects and well-coordinated marketing, they will be in the bear market. rise.

Computing power after Ethereum PoS

When Ethereum transfers PoS, the original computing power needs new targets. This has to lead to another thought. The new PoW currency is not only Kaspa, but also many old PoW projects. Why can’t it perform as well as Kaspa? The main reason is to return to the innovation of the PoW project.

The rise of Kaspa is not purely due to the PoW mechanism itself, but the combination of PoW and BlockDAG, an innovative DAG technology, to become the layer 1 with the fastest processing speed and the largest transaction volume in the PoW chain. The market will no longer pay just because of the word PoW, and something new must come up.

If you simply evaluate from the perspective of Layer 1, which has the fastest processing speed and the largest transaction volume, you can immediately think of many capital-driven projects, such as Solana, Aptos, and Sui, all of whom have abandoned the "old" PoW mechanism. The emergence of Kaspa breaks this point, although its BlockDAG technology seems to be another form of "big block route".

This also once again verifies the previous point: **PoW plus good innovation can also successfully rise in a bear market. **

PoW Project Innovation Review

Therefore, the innovation of PoW is very important, but this article discusses the innovation of the narrative direction of the PoW project, not the innovation of the technical details of PoW. The innovation of the technology itself will be discussed in a new article. Let's first review the innovation journey of PoW projects. In the following innovation stages, we mainly distinguish whether PoW projects enter the top 100 in market value.

Bitcoin is the first successful project of PoW mechanism. After Bitcoin's first phase of success. At that time many latecomers gained market attention only by forking and simply modifying some parameters, such as Litecoin, Dogecoin, Bitcoin Cash and so on. Some even just reconstruct the code language of Bitcoin. For example, NEM is a rewritten version of Bitcoin's Java language, with the purpose of making enterprise-level Bitcoin.

Therefore, the main purpose of the first phase of PoW innovation projects is to surpass Bitcoin and fill the gaps in market segments, even if the targeted market does not seem to have much value now.

The second innovation stage is PoW. Combined with PoS. Representative projects include Peercoin and Dash. Its purpose is to have some kind of governance over its project development through PoS. At that time, after the success of Bitcoin, the value of PoW was magnified, which boosted the development of PoS**. Everyone used to think that PoS would play the same important role as PoW or even completely surpass PoW. This influence still exists, and the typical representative is the development of DAO, which believes that efficient decentralized cooperation can be carried out through various PoS mechanisms.

The third innovation is the PoW privacy coin represented by Monero. Later, new privacy coins such as Zcash, Gulingcoin and IronFish also appeared, but it can be seen that the latecomers failed to Beyond Monero. The main reason is that Privacy is ultimately to meet needs, and privacy technology is not a goal but a means. The effect of privacy has not changed much, and no matter how new the technology is, it is useless. Plus privacy has network effects and requires a lot of money to mix. Monroe's user portraits are accurate, mainly serving hackers, and ordinary people do not have a strong need for privacy.

Another point can be found that new privacy projects tend to adopt PoW. The important reason is that privacy requires a truly decentralized mechanism, and all kinds of PoS will bring centralization problems to some extent. The degree of decentralization of the chain is not guaranteed, and privacy is out of the question.

The fourth innovation is PoW combined with smart contracts. Ethereum is a representative of this direction. Although it has turned to PoS, there are still public chains with smart contracts that insist on using PoW, such as Nervos and Conflux. The main reason for its adoption is that **PoW mining is currently the fairest token distribution system, and it is a long-term proven robust consensus mechanism. **

The fifth innovation is PoW combined with DAG technology. DAG technology is not strictly a blockchain. Its main purpose is to improve the TPS of the PoW chain and solve the problem of slow Bitcoin transfers at Layer 1. However, DAG technology usually needs to be done between decentralization and double spending prevention. trade-offs. It currently represents Kadena and Kaspa, among others. Kaspa at the beginning of the article innovated on DAG technology.

From these five innovations, it can be found that the essence of its innovation is to solve the three aspects of improving the blockchain: transaction speed, privacy and transaction form diversity.

New Opportunities for PoW Projects

The innovations of these PoW coins all represent the top 100 projects in the global market capitalization. So besides these five innovations, are there any PoW innovations that have not yet been discovered? At present, the author found that there are mainly four.

The first , the combination of PoW and NFT. Representative projects include HACD.art, PoW NFT, and Mineable Punk. From these projects, we can analyze the effect of PoW on NFT. PoW can make the distribution of NFT more fair, instead of the team controlling the distribution. This is the advantage of all PoW NFT projects.

In addition, the number of blue-chip NFTs is limited. How to solve the number of new blue-chip NFTs is more reasonable to adopt the PoW mechanism, which is a feature of MineablePunk; PoW can also improve the long-term sustainability of NFTs, because PoW can Let NFT stop production when demand decreases, and at the same time produce output when demand increases. Like HACD.art, it has gradually adjusted the difficulty of PoW output. Similar to Bitcoin, its mining cycle will be longer. The scale of force will also be larger.

The second one is the combination of PoW and stable currency. Algorithmic stablecoins have failed one after another due to the inability to achieve simultaneous scale, decentralization and stability. And PoW has solved the decentralization and large-scale problems very well (Bitcoin has solved it), so how to maintain the stability of its purchasing power, there are currently two directions, one is, for example, Hacash uses three PoW coins, Stability adjustment is carried out in a decentralized manner, but it cannot achieve stability linked to legal currency, and can only achieve relatively stable purchasing power. The other is for example Meter to regulate stability by utilizing PoS governance. However, POS governance coins are officially issued, so PoS-based management is actually centralized.

The third one is the combination of PoW and AI. The rise of AIGC has made everyone see the future trend of AI. The operation of large models requires massive computing power, so the opportunities generated can only be monopolized by large companies. Then the combination of PoW and AI can break this situation. Mining and AI model calculations are carried out through PoW to form a decentralized large-scale model network. Projects in this direction include Bittensor and Tromero. But to find a use for PoW, it is very difficult to innovate at the technical level. Because the effective operation of the blockchain requires a smooth computing power curve, and the difficulty of the algorithm to solve practical problems is discrete and jumping, and the effectiveness of the evaluation results depends on manual decision-making, and it is bound to rely on centralized Solutions, such as Bittensor, use PoW token pledge to make decisions.

Fourth, the combination of PoW and Bitcoin. This combined innovation is the one-way transfer of Bitcoin proposed by Hacash. Its purpose is to use one of the PoW coins to compensate for the risk after transferring Bitcoin after the one-way transfer of Bitcoin. Its value and driving force lie in Hacash The three-coin system is similar to the adjustment mechanism of ancient gold, silver and copper. If the one-way transfer of Bitcoin is successful, it is very likely that new PoW projects such as Litecoin one-way transfer will appear, which may be the tipping point of the next round of PoW project narrative.

Why is the PoW mechanism considered obsolete?

We can see that the unique value of PoW and the opportunities for innovation continue. But why does the crypto industry think PoW is obsolete?

The main reason is that PoW lacks the tipping point obtained by Ethereum (mainly ICO), so that Ethereum leads the development of the industry. At the same time, in order to prove the correctness of PoS, it deliberately leads everyone to pull PoW and PoS into a single ledger Consensus level to compare. But if we look at the mechanism alone, we can see that the value of the PoS mechanism mainly depends on the innovation brought by the Ethereum smart contract, and has little to do with PoS itself. Because the failure of the former PoS chain Peercoin is enough to prove it.

In addition to the lack of a tipping point in PoW and the single-dimensional attack of the later PoS mechanism at the ledger consensus level, there are five other reasons:

1. Pursue New Narrative. The PoW mechanism accompanied Bitcoin at the beginning of the entire industry, and newcomers entering the encryption industry are mostly attracted by the current trendy hotspots, looking at the new rather than the old.
2. Consumes energy. PoW consumes energy and is misunderstood as unnecessary waste, leading to resistance from some people.
3. Innovation is difficult. PoW-based innovation is more low-level and difficult, and is strongly related to economics or economic models. Not so many teams have the ability to make differentiated and meaningful improvements.
4. PoW is not beneficial to the project party. The essence of the mechanism is closely related to the fairness of token distribution, which is beneficial to the community, but it has become an obstacle for the project party to become the dominant interest. As a result, few teams are motivated to do PoW-related projects.
5. PoW is not good for capital. With the development of the industry for more than ten years, the participation of venture capital has been greatly improved, and it has even become the leader of most projects. The token cost of the PoW mechanism is not conducive to the rapid exit of capital.

The above 5 points are the main reasons why the PoW mechanism is considered obsolete. However, Bitcoin based on PoW has always been firmly seated on the throne of the first market value, and new PoW projects continue to appear, and Deus has performed well, proving to everyone the significance of consuming energy to maintain the operation of the blockchain, and the success of PoW Not only Bitcoin, PoW opportunities still exist, what is needed is more people to re-examine PoW, pay attention to PoW, and innovate based on PoW.