Ecological Blockchain Consensus

An energy saving blockchain by using cooperation instead of competition

Proof-of-Cooperation is the unique consensus algorithm developed for FairCoin. In contrast to other cryptocurrencies and starting in 2017, FairCoin does not use any mining or minting functionality any more, which are both competitive systems. Block generation is instead performed by so-called certified validation nodes that cooperate to secure the FairCoin blockchain.

In the blockchain value can be transferred without the need of a central authority. Transactions are validated by all participating nodes which follow the same consensus rules and thus maintain the integrity of the blockchain, which is the common and immutable database for all transactions. Two technical methods are widely used to prevent fraud like double-spending:

  • Proof-of-Work requires miners to solve a mathematical puzzle. The winner is "mining" Bitcoins. Investors have built big computer farms, that compete for the challenge. Altogether, they consume hundreds of Megawatts electricity.
  • Proof-of-Stake asks users to prove ownership of a certain amount of currency. Minting new coins based upon the number of coins, or “stake,” you hold. But Proof-of-Stake may be abused by those who hold enough coins. As there is little cost in trying to cheat, rich nodes could be slowing down the transactions so that the network gets unusable. Therefore Proof-of-Stake is usually combined with Proof-of-Work in a ratio like 5:1, so this method still would require a lot of energy.

Proof-of-Cooperation does not implement any mining or minting functionality, which are both competitive systems. Instead, certified validation nodes (in short CVNs) cooperate to secure the network. Proof-of-Cooperation will be introduced with FairCoin2 in 2017, whilst keeping all balances from the old FairCoin1 network.

With FairCoin2, there is no reward for block creation. Therefore, the money supply is not further changed by creating blocks. A very small transaction fee goes to the respective block creators to compensate their efforts for running a CVN (energy and bandwidth costs).  Even if the network of CVNs may grows, the power consumption is negligibly low. CVNs can be run on a Raspberry3 which consumes only a couple of watts.

How does the proof-of-cooperation algorithm work? The consensus rules determine which CVN has to create the next block. Each CVN approves that CVN by digitally signing a piece of data which contains its unique ID. After the respective CVN received all the necessary signatures, it takes pending transactions and forms a new block which is then stored in the immutable and distributed blockchain database.

For further details of our Proof-of-Cooperation mechanism, see the FairCoin2 white paper. or the technical documentation on github.