A currency serves three functions:
providing a means of payment, a unit of account and a store of value.
"The concurrent circulation of several currencies might at times be slightly inconvenient, but careful analysis of its effects indicates that the advantages appear to be so very much greater than the inconveniences that they hardly count in comparison, though unfamiliarity with the new situation makes them appear much bigger than they probably would be." - F.A. Hayek, 1974
The thing that makes crypto-currency both amazing but also a little tricky to initially understand is that the transactions are processed by a network of many computers, to ensure the currency cannot be controlled by a single entity.
Burstcoin is one of many new private currencies build on Bitcoin's Blockchain technology.
Description of Proof of Capacity Algorithm
For those who have not studied Proof of Work, a brief summary is that a Proof of Work is a calculation done that proves that an immense number of calculations (aka work) went into creating it. In Proof of Work systems, miners continuously run numbers through a hash function looking for inputs which produces outputs that satisfy some set of constraints. In Proof of Capacity, miners do this work once up-front, and save the results which they can continue to use each block without needing to continuously do work.
Though the general idea of delaying Proofs of Work has been previously proposed, it wasn’t until recently, with the introduction of Burst’s algorithm, that it has become viable without leaving open an easy way to cheat the system. Many people who’ve heard of it, haven’t fully thought through the implications of a Proof of Capacity coin and see it as a toy algorithm. However, I am of the belief that Proof of Capacity could prove to be the most successful cryptocurrency algorithm in the long run. This could very well play out a little bit like Google’s invention of PageRank. Sure, there were other search engines, even some big ones, but all of them had issues when it came to finding the information you needed. Google came out with the algorithm that fixed this. I believe people will similarly soon realize the power of Burst in the near future.
Mining is the act of using these plotted hard drives to power the network. While mining, miners package all transactions they see on the network that have not yet been submitted into ‘blocks’. Then miners pull those Proofs off of the hard drive using a predetermined set of rules and submit them to the network. The end result is that the more hard drive space you contribute to the network, the more power you have over the network.
A little bit more detailed and technical explanation for those who are interested is that Burst splits your hard drive into thousands of segments and when plotting it calculates a qualifying hash to determine whether a given nonce is valid. If it is valid, then it randomizes this number again with another hash to determine which ‘bucket’ to place this result into.
In other words:
qualifyingHash = hash((public account number) concat (drive Id) concat (nonce))
If(qualifyingHash < target)
bucketNum = hash(qualifyingHash) % (number of buckets)
Then if it is valid, write the nonce to that bucket on your hard drive. Then you choose a new nonce and repeat until your plot is full. Most of the nonces will not be valid but this continual checking of new nonces is the Proof of Work that proves that many calculations went into finding the correct nonces.
While mining, the miners find the strongest block they can to build off of and cryptographically sign the previous generation signature with the public key of the miner whose block they are building off of. This produces a random number that is reproducible by the rest of the network and is the current blocks generation signature.
While mining, the generation signature is hashed with each valid nonce of each miner. 8 bytes are taken from the hash, then divided by a scaling factor which is related to the inverse difficulty. Where difficulty is the measure of how hard it is to find a block for a miner on the network, the more miners the higher the difficulty. The resulting number is a number of seconds. As soon as that many seconds have passed since the last block without a new one having been announced, the address/nonce combination used to generate that plot/scoop is eligible to announce a new block.
"If the existing currencies continued to depreciate, the demand for a stable currency would rapidly increase and competing enterprises offering similar but differently-named units would soon emerge" - F.A. Hayek, 1974
The advantage of Burstcoin is its unique algorithm that solves Bitcoin's biggest problems:
very low energy usage per transaction
decentralized by design
mineable by everybody