The Central Bank of Canada has pioneered new research using the PoW or Proof of Work consensus in a new article on blockchain technology.
The Bank of Canada or BoC has labeled Bitcoin’s Proof of Work system the best consensus algorithm used by any cryptocurrency. There’s several other consensus protocols used in the industry by various altcoins, but the PoW is by far the best there is according to the bank, beating out others like the PoS system used by certain coins.
The Proof of Work protocols have been the main focus by the bank, due to them being the most efficient protocols for achieving consensus. The power of the protocol is derived from the Satoshi Portal CEO Francis Pouliot, who is a major crypto-analysts as well. The report was released to the public just two days ago on July 25th 0f 2018.
The company has focused primarily on the PoW protocol for achieving consensus because security is far tighter with it. Other systems like the PoS or Proof of Stake are easily manipulated by users across the blockchain looking to manipulate the data. Users randomly gain access to blocks on the PoW system, with aspects like how much cryptocurrency the user owns, influencing their chance on gaining access to a stake.
But, with the Proof of Work system, hackers need access to powerful computers with lots of energy running them to manipulate any data. Anyone who attempts to commit fraud and fails will lose a significant amount of personal resources, i.e. time, money, energy and possibly reputation, making it less attractive to shady investors or hackers.
The Central Bank of Canada tested several different consensus protocols, with various cryptocurrencies – but the systems other than Bitcoin and it’s PoW didn’t hold up to the needs of the bank. Other systems like the PBFT or Practical Byzantine Fault Tolerance where tested as well, but simply were unrealistic due to the lack of communication capabilities of most users and resources needed to make them efficient.
Until now the Bank of Canada has been another Bitcoin skeptic, but, even with the skepticism of the bank, they’ve still spent the last two years researching into the growth of cryptocurrency. Currently, at least 85% of Canadians know of Bitcoin, making it a smart move on the bank to start developing around it.
The Bank isn’t making any final decisions by any means, only researching for proof that cryptocurrency has capabilities which can benefit users of the bank’s financial system, making it safer for their customers.
The bank still is skeptical of most consensus protocols, namely that of algorithm security. They found them to be extremely susceptible to hacking with large sums of funding required to keep them truly protected. One solution noted that upgrading the system so the PoS protocol, which would eliminate the ability to hack so easily on a given system.
Is the Canadian Bank’s judgement on cryptocurrency consensus protocols accurate? Leave your thoughts in the comments section below.