Getting it Right
Every week new cryptocurrencies appear. Now, a company calling itself TAU (the active unit) have added to the mix by announcing TAU Coin. What makes TAU different from other coins is the introduction of a new consensus model, Proof of Transaction (POT).
At the heart of every blockchain system is a consensus model and a protocol that defines the way nodes agree on the order and validity of transactions. This is particularly important in public blockchains which are open to many attack vectors and use economic incentives and fee structures, to ensure misbehavior is not desirable for participants and full-scale attacks are not viable economically.
However, the search for the perfect consensus model is still ongoing. The two most common options are Proof of Work (POW), as used in Bitcoin, and Proof of Stake (POS), which was first used in Peercoin and should eventually make it to Ethereum.
Both models have their flaws, particularly since they both favor the wealthy, either through the amount of hardware required (POW), or the funds accumulated (POS). POW is also criticized for its energy consumption, and POS directly encourages locking up vast amounts of cryptocurrencies instead of using them. TAU attempts to change this with POT by incentivizing circulation.
Proof of Transactions
POT uses a sliding 365-day window and calculates the number of transactions executed in this window. This number is used as a weight for determining the likelihood of being chosen as a block producer. The actual process of determining the next block producer is a pseudo-random process, based on the algorithm used in NXT, one of the early POS of stake blockchains, weighted by the number of transactions.
The goal of this is making consensus fairer by incentivizing keeping coins in circulation, instead of favoring wealthy participants. The protocol natively supports harvest clubs, the equivalent of mining and staking pools. The feature allows addresses to delegate their transaction history to each other, accumulating weight in the consensus model and sharing proceeds.
Making transactions, meaning actually using cryptocurrencies, has long been identified as one of the keys to adoption. Holding cryptocurrencies for staking or as an investment might turn cryptocurrencies into interesting financial instruments, but does not fit the definition of digital currency. In this sense, TAU’s model of POT might actually be on to something and help adoption of cryptocurrencies as a method of payment.
*When it comes to TAU, founder iMorpheus believes “that Proof-of-Transaction is the best consensus mechanism when it comes to being the most secure, fairest, and most environmentally friendly decentralized network”.
TAU is taking on any and all who wish to challenge this statement, by running a “Debate Bounty”, ending September 30, 2018. 1 Million TAU + $1,000 worth of BTC will be awarded to the best argument/idea/proof, as decided by a vote of TAU’s telegram community on the top 3 ideas.
As with most newly launched blockchain projects, there are still some unanswered questions. Currently, only a recently launched test network and a web wallet are available for users to try out the new currency.
The white paper of the project, while being well-written and concise, is short on detail and leaves many technical questions unanswered. Furthermore, the current built-in reward distribution scheme for harvest clubs seems to rely on the good-will of the harvest club owners to not claim 100% of the rewards. Finally, the pseudo-random generation algorithm for block generation is predictable in the short-term, according to the project’s whitepaper. The search for better on-chain random number generation is ongoing research, and not unique to the TAU project.
Nevertheless, POT is an exciting concept and time will tell whether it leads to fairer consensus and increased cryptocurrency circulation.
*Article has been updated with a quote from founder iMorpheus and to include the Debate Bounty development.