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<p>The post <a href="https://coinpedia.org/information/fixing-blockchain-consensus-performance-issues-with-hybrid-pow-pos-approach/" rel="noopener noreferrer nofollow">Fixing Blockchain Consensus Performance Issues With A Hybrid PoW/PoS Approach</a> appeared first on <a href="https://coinpedia.org" rel="noopener noreferrer nofollow">Coinpedia Fintech News</a></p>
<p>Cryptocurrency and the decentralized financial ecosystem have come a long way since their emergence in the last decade, but if these technologies are to become more widespread and supplant fiat in our daily lives, the existing infrastructure needs to be improved.&nbsp;</p>
<p>According to <a href="http://meter.io" target="_blank" rel="noopener noreferrer nofollow">Meter.io</a>, of the main problems holding back DeFi is the lack of a stable, decentralized unit of account that represents an established value for DeFi applications and transactions.&nbsp;</p>
<p>DeFi is built on blockchains, decentralized ledgers that record the history of value transfers. Blockchain aficionados say the technology is superior to fiat money systems because it eliminates the need for a physical unit of exchange. The ledger is universally accessible and provides a constantly updated record of everyone’s accounts, so there’s no need for anything else.&nbsp;</p>
<p>However, existing cryptocurrencies are far too volatile to serve as this essential stable unit of account, which makes them unsuitable for frequent, day-to-day transactions. Stablecoins provide an alternative, but there are fears around centralization, their limited scalability, and their reliance on third-party data oracles.&nbsp;</p>
<h2 class="wp-block-heading" id="h-hybrid-consensus-to-the-rescue">Hybrid Consensus To The Rescue</h2>
<p>Looking to solve this conundrum is Meter.io, a <a href="https://docs.meter.io/overview-of-meter/introduction-to-meter" target="_blank" rel="noopener noreferrer nofollow">novel Layer-1 blockchain</a> platform that’s the first to feature its own metastable cryptocurrency. Besides functioning as an L1 that’s laser-focused on DeFi, it can also serve as a high-performance EVM-compatible side-chain for Ethereum and other networks.&nbsp;</p>
<p>Meter’s biggest innovation is its <a href="https://docs.meter.io/overview-of-meter/hybrid-consensus-mechanism" target="_blank" rel="noopener noreferrer nofollow">Proof of Value (PoV) consensus mechanism</a>, which builds on an idea <a href="https://twitter.com/vitalikbuterin/status/1540233065368354817" rel="noopener noreferrer nofollow">mooted</a> by the Ethereum co-founder Vitalik Buterin:&nbsp;</p>
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   <p lang="en" dir="ltr">Why not hybrid proof of stake, of the 2013-15 era designs where you have interwoven PoW and PoS blocks, so an attacker needs something like `work_share + stake_share &gt;= 1` to do a 51% attack?<br><br>Still politically sellable as PoW, but may get you enough of the security gains.</p>— vitalik.eth (@VitalikButerin) <a href="https://twitter.com/VitalikButerin/status/1540233065368354817?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">June 24, 2022</a>
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<p>The PoV consensus is essentially a hybrid of a Proof of Work consensus that enables it to create a decentralized, low-volatility cryptocurrency known as MRT for payments and fees and a HotStuff 2 BFT-based Proof of Stake mechanism that enables the MTRG governance coin for transaction validation.&nbsp;</p>
<p>The infrastructure is said to be capable of processing thousands of transactions per second with almost instant finality and enhanced network security. Ideal for everyday payments, it can also be used as an EVM side-chain to improve the scalability of decentralized exchanges, yield farming algorithms, and other kinds of dApps.&nbsp;</p>
<h2 class="wp-block-heading" id="h-why-two-tokens">Why Two Tokens?</h2>
<p>By having two native cryptocurrencies, Meter is unique among blockchains in that it can separate economic consensus from the record-keeping consensus mechanism. In this way, the economic consensus, represented by MTR, is used to determine the amount of new value added to the Meter economy based on demand, while the record-keeping consensus, represented by MTRG, is about delivering security and avoiding double-spending.</p>
<p>This division of power is one of the most fundamental concepts of Meter’s design. It mirrors the reality of traditional finance, where physical miners work to extract gold and silver from the ground, while bankers and others maintain the financial system through their record-keeping. The collaboration of miners and validators in this way helps to make Meter’s ecosystem stable, secure, and highly scalable.&nbsp;</p>
<h2 class="wp-block-heading" id="h-the-role-of-proof-of-work">The Role Of Proof Of Work</h2>
<p>The Proof of Work consensus in Meter performs three main functions, including the creation of new tokens, generating true randomness and instrumenting the notion of time. It’s based on a permissionless mining network that anyone can join to start minting new MTR tokens. However, unlike other PoW blockchains such as Bitcoin, Meter has adapted the mechanism to ensure the cost of MTR token production remains stable and consistent and cannot be altered. So new MRT tokens are only created when it makes sense from an economic perspective.&nbsp;</p>
<p>This is similar to how miners work in the real world. A gold mine operator will invest more in its operation when the price of gold is high, and scale back its spending when the price is low. Meter replicates this, maintaining a delicate balance that ensures the stability of the MRT asset.&nbsp;&nbsp;</p>
<h2 class="wp-block-heading" id="h-the-role-of-proof-of-stake">The Role Of Proof Of Stake</h2>
<p>As for PoS, this is the mechanism used to enable record keeping, similar to the role played by banks in traditional finance. Meter supports a wide pool of validators that manage the underlying blockchain, whose job it is to verify and validate transactions and prevent double-spending and censorship. A group of validators is selected randomly at the start of each new epoch, and then form a committee. For each epoch, only the validators chosen to sit on the committee can create and vote on new blocks, operating via a BFT-style consensus mechanism. The advantage of this approach is high performance and instant transaction finality, which is a key requirement for dApps if they’re going to replace traditional banking apps.</p>
<p>As such, Meter essentially has two separate blockchains – one for PoW and one for PoS – which only interact with one another at the end of each epoch, when they’re cross-referenced to ensure network security.&nbsp;</p>
<h2 class="wp-block-heading" id="h-delivering-the-security-stability-amp-efficiency-defi-needs">Delivering The Security, Stability &amp; Efficiency DeFi Needs</h2>
<p>Most other blockchains tend to merge the concepts of currency creation and record keeping, even though they are two fundamentally different things. By separating them, Meter ensures that its PoW mining operations for MRT creation consume much less energy, while transactions can be approved much faster and with instant finality. The design also helps to avoid traditional problems with decentralized networks such as “long-range attacks” and the “rich-get-richer” problem associated with many PoS chains.&nbsp;</p>
<p>As we’ve seen in Bitcoin and other PoW networks, the network hash rate is often directly correlated to the price of BTC and its market cap. But with Meter, the hash rate only correlates to the market cap, but not the price, which is an extremely important factor that enables it to maintain the value of MTR and prevent censorship and other kinds of attacks.&nbsp;</p>
<p>Meter says the separation of these two consensus mechanisms allows it to reduce the conflicts between miners, developers and network users, making its monetary system more efficient and secure.&nbsp;&nbsp;</p>

Fixing Blockchain Consensus Performance Issues With A Hybrid PoW/PoS Approach

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