While it provides essential security for the bitcoin network, there is little doubt that using 'proof of work' as a validation mechanism requires an enormous amount of energy.
Where once blocks could be mined by amateurs with laptops, the mining process now involves warehouses full of specialized processors that are more or less useless for any purpose other than mining bitcoin.
Even ignoring questions of waste, power-intensive mining has inarguably also led to geographic concentrations of the industry. Because miners receive the greatest returns where energy is cheaper, areas like Iceland, western China and Washington State have become the dominant epicenters.
The search for a system that would encourage the opposite of these qualities – generic equipment, non-wasteful work and low power consumption – is what led developer Bram Cohen to propose the verification of computer storage ownership as an alternative to proof of work.
His so-called 'proof of space' is relatively new in the cryptocurrency world, but Cohen (who's best known for creating the BitTorrent protocol) has a well-earned reputation in the field of distributed systems, and, as a result, the community has already taken interest in the proposal.
In conversation, Cohen elaborated on the idea, arguing that the proposal is a natural iteration of the ideas powering bitcoin today.
Cohen told CoinDesk:
"There are lots of things not to like about proof of work in bitcoin. But in the question of 'How can we change this?', it turns out the key thing is power."
Space vs power
Under the present system, computing vast numbers of hashes leads to a race to find the cheapest power supply and use it as efficiently as possible.
According to Cohen, any alternative to this system would need to be based on a proof of something less power-demanding.
"The only other resource to use for that is storage. So, that results in the theoretical possibility of proofs of space, where you allocate storage capacity to do this stuff," Cohen said.
Under a proof-of-space system, miners allocate a certain amount of their unused disk space to the network, with the probability of successfully mining a block being proportional to the amount of space allocated divided by the total capacity of the network.
To be fair, this idea didn't originate with Cohen. In fact, a white paper by another research team explains how a cryptocurrency based on proof of space, dubbed SpaceMint, would work in practice.
To briefly summarize, miners add new transactions into a block by combining them with values from a lookup of data stored in a space they have allocated for mining (the location of which is dictated by a random challenge). A large enough sample range is then used to prove the total size of storage.
One notable consequence of using storage as a proof, is that it could democratize the mining process.
"Storage is different to power or processing in that it's very easy to have lots of additional capacity lying around. Someone who bought a hard drive for an unrelated reason and happens to have storage to spare will be willing to get extremely low returns on it, because it's not costing them anything extra to mine with it."
This means that the network as a whole can be viable, while rewarding miners at well below the market price of their hard drive space. Another upshot of proof of space is that there is no incentive for any actors to try and gain mining share by spending large sums on storage space up front.
Additionally, the addition of a time element guards against potential vulnerabilities that occur when, as with the SpaceMint proposal, proof of space is the only requirement for mining.
"There's a problem if you just have proofs of space: you made it so that it doesn't cost anything to do mining," Cohen said, adding
"This creates an inherent attack where someone with a large amount of resources can re-mine since genesis – go back to the beginning and make a whole new chain, giving themselves all the rewards."
In order to prevent this, Cohen's idea is to use proof of time in combination with proof of space, specifically, proofs derived from a dedicated time server on which some time will elapse in between each period of mining.
While not eliminating the ability to re-mine blocks since genesis, this would mean that there is no way for an attacker to catch up to the current chain – a provision that he believes has been left out of other proof-of-space proposals.
At the moment, Cohen is cagey about whether he will put his own proposals into practice, but said that, in principle, alternative cryptocurrencies should be launched only if they bring something new to the table.
"For the most part there shouldn't be the need [to launch new coins], but I have this idea about underlying mining and how it works that does make it inherently different."
For now, though, Cohen would not say anything more. While it's tempting to read that as a tacit admission that something is in the works, only time – and space – will tell.