It’s been a few days since 2019 began. In the spirit of new beginnings and improving ourselves, it’s only fitting to discuss the future of cryptocurrencies, and how they can be improved. 2018 has been a rough year on cryptocurrencies, with a bearish market and many projects either losing momentum or stopping altogether. However, we are seeing a period of slow recovery, and it’s not unreasonable to be optimistic about the market right now. However, we should look not just at the improvement of profits and prices, but at the technology behind cryptocurrency, and what is being done to improve the technology.

Currently, there are two main arguments against cryptocurrency. The first is that it uses massive amounts of energy, and the second is that cryptocurrencies don’t have intrinsic value. As difficult as it can be to admit, these are both valid arguments. Instead of getting upset, we should collaborate as a community to find solutions to these problems.

Alternatives to PoW

Bitcoin Network uses approximately 45.49 TWh of energy annually. To put that into perspective, that’s around 45 BILLION KWh. If the energy used in the mining network was instead used to power homes, it could power approximately 4,211,993 houses in the U.S. While proof-of-work works on paper, the amount of electricity it consumes as the network grows larger is concerning, especially from an economic/environmental standpoint. Currently, there are three other consensus mechanisms other than PoW that are widely known.

-Proof of Stake: Holders of this kind of currency are rewarded coins based on how many they currently own.
Pros: Passive income for the user, far less energy consumption
Cons: Discourages spending, limiting its usefulness as a currency instead of a store of value.
Examples: Dash, NEO, Reddcoin

-Proof of Capacity: In order to mine this kind of cryptocurrency, your device’s hard drive space is used, instead of its computing power.
Pros: Again, less energy consumption, does not encourage hoarding
Cons: Storage space could be used for other purposes, and discourages installing other programs, Malware and other computer viruses that affect data/storage can harm mining capability.
Examples: Burstcoin

-Proof of Authority: Approved accounts in the network become “validators,” and must maintain a node using automated software. Their device must run uncompromised, around the clock, and their reputation is directly tied to their ability to earn/keep the position.
Pros: Validators are incentivized to maintain the network, both for their continued profit and for their reputation.
Cons: Centralized concept, putting power in the hands of a few people chosen by an authority, instead of distributing trust across an entire network.
Examples: VeChain, POA Network

These are some of the more well-known alternatives to PoW mining. If you know of any others, or even have ideas for alternatives that haven’t been thought of yet, please let us know!

Tokenization of tangible goods

Many people argue that while cryptocurrencies do not technically have intrinsic value, neither does fiat. While this argument is factually correct, this should not be where the argument ends. We should make efforts as a community to improve the concept of cryptocurrency OVER fiat. Instead of saying that fiat has the same problems as cryptocurrency, we should work to reach a point where we can say cryptocurrency can solve the problems of fiat. While stablecoins are a good first step towards this, as well as greater mass adoption, it would be interesting to see tangible goods, or at least ownership of tangible goods such as gold, energy, or other commodities, to be tokenized.

It would be interesting to see such “Commodity Coins” being utilized as a way to give cryptocurrency intrinsic value. Perhaps one day, you could theoretically pay for something with electricity, for example. Instead of having to store these items yourself, the ownership of them could be in the form of a crypto token, which can be traded/spent like any other cryptocurrency, but could also be redeemed for a good.

Another method to give cryptocurrencies intrinsic value would be to use them as a measure of voting power in a network. A recent example of this is the Decentraland coin, MANA. MANA itself is used as a medium of exchange on the Decentraland Marketplace, but was also used as a measure of one’s voting power in the “Agora” system. With this, the more MANA a person held, the more weight their vote would hold when it came to decision making for the platform. While some could argue that this leads to a more centralized system, where people who already had enough wealth could hold greater power over a network, it is at the very least a step forward in giving cryptocurrencies intrinsic value.

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Blockchain and cryptocurrency technology is truly revolutionary, and we’re just now beginning to see various projects and networks bear fruit, especially in gaming and NFTs. That being said, we should always seek ways to improve the technology, and need to be willing to research, experiment with new ideas, and most of all, communicate. The only way we’ll begin to see true mainstream adoption and a brighter future with blockchain and cryptocurrencies is if we seek solutions to the problems that we currently face as a community, and one day, skeptics will see cryptocurrency less as a worthless energy consumer, and more as the innovative technology that it truly is.

SOURCES:

Bitcoin Energy Consumption: https://digiconomist.net/bitcoin-energy-consumption

Proof of Stake: https://www.investopedia.com/terms/p/proof-stake-pos.asp

Proof of Capacity: https://www.investopedia.com/terms/p/proof-capacity-cryptocurrency.asp

Proof of Authority: https://nulltx.com/what-is-proof-of-authority/