Q: What is a Consensus Mechanism? [Free: #26]
We spend a lot of time talking about the top of the stack here, but the foundation of the stack is just as important. This week we start a series examining mining and consensus.
We’ve spent probably the majority of our efforts on this list talking about the absolute top of the stack when it comes to blockchain (tokens, smart contracts, ICOs, NFTs, etc)... but we haven’t spent a ton of time talking about the absolute bottom of the stack: namely consensus mechanisms and mining.
We’re going to start a multi-part series over the next month or so that explores the interesting concepts at the bottom of the stack when it comes to digital currencies and blockchain.
If you ask most blockchain folks where to start, they might say mining; of course I have a slightly different take on things. I think the absolute bottom of the stack should be more accurately termed “consensus mechanisms.”
I’ve been asked by some of you to expound on various aspects of bitcoin and cryptocurrency mining, but I realized that I’ve never done a real deep dive on mining in particular, so we’re going to take this week and the next few issues afterward to talk about: consensus mechanisms, bitcoin mining, as well as some secondary but related topics like merged mining, and deeper dives on the environmental impact of mining.
These will for sure trigger further questions, so if you see anything in this issue or subsequent issues that you want me to dig further into for you, mash that reply button and ask away!
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Blockchain Bulletin
The original Doge meme sold for $4M in June now valued above $225M. The original Doge meme NFT, that sold for $4 million in June, was sold in fractionalized ownership by investors for over $225 million in under 24 hours, reported CoinDesk.
Audius music streaming platform integrates Solana-affiliated NFTs. Blockchain-based music streaming platform Audius has integrated Soloana NFTs via the popular Phantom wallet to enable its over six million users access to unique listening experiences, reported CoinTelegraph.
Twitter reportedly testing a Bitcoin tipping option. Twitter is reportedly testing out a new option to allow users to tip one another in BTC, reported Bitcoin.com, which was discovered in beta code.
Blockchain Behind the Scenes
Offchain Labs raises $120M and launches its Arbitrum mainnet. EthereumLayer 2 scaling company Offchain labs raised $120 million in funding to launch its Arbitrum One mainnet that will help developers run transactions faster and cheaper on the Ethereum blockchain.
Simba Chain raises $25M in funding. Best known for offering its blockchain services to defense organizations, Simba Chain announced $25 million in funding to seek new opportunities in nonfungible tokens.
Blockchain Deep Dive: What are “consensus mechanisms?”
… and why is “consensus mechanisms” the foundational term and not mining?
We first explored this topic in our issue on Byzantine Fault Tolerance.
Rather than simply focusing on mining, we’re looking at both Proof of Work and Proof of Stake.
A growing number of blockchains are using Proof of Stake.
Beginning with Proof-of-Work, the technical description consists of three moving parts: The node, the miner and the wallets.
The node is the conduit for blockchain data between the rest of the network and the mining equipment.
The miner, after receiving cryptographic block data, will brute force attack it until it arrives at the right solution (or someone else on the network does).
The rest of the network will verify results and award that miner the block rewards, if it’s correct.
I like to use a “lottery ticket” metaphor to explain this.
Mining power is measured in hashes, and each hash is like a lottery ticket to win the block rewards.
Modern mining equipment will give you 100 trillion tickets per second in a 10 minute lottery with 130+ septillion solutions.
Proof of Stake, using the lottery metaphor, is very easy to explain, by extension: your lottery ticket to perform the “mining” operation isn’t clockcycles on a machine, but the tokens themselves.
In the paid version of the newsletter, we go a bit deeper, talking about even more consensus mechanisms. Subscribe today!
Technical Analysis: ETH and the alts are set to move.
From VirtualBaconDAO’s Dennis Liu
I have two scenarios:
Setup 1: Wait for a dip down to the 21 daily EMA level around $3,500, with a stop loss at $2,900.
Setup 2: If there are no dips, wait for a new ATH above $4,100, and then buy on the retest at that level with a stop loss at $3,900.