The difference between POW/POI

As we all known, to mine a Bitcoin in Bitcoin system, you need to work out some complex mathematical puzzles which automatically generated by the system, and the one who work out this complex problem first rewards with Bitcoin or other tokens in the system. We calls this process: mining.

The conception beneath mining is an consensus algorithm that make the system function well, such as preventing double spending problem, confirming and producing new blocks on the blockchain. The algorithm here is called POW, or the proof of work. Literally, it means the proof of how much work you have done and the time you finish working out that puzzle. In other words, it’s proves you are the one and only miners that successfully processes the transaction. This algorithm is widely implemented on the blockchains,such as Bitcoin, Chronos, iTicoin.

However, there is bug or shortcoming within this mechanism, that is, whether you can “win” the tokens rewarded for processing a transaction is determined by how much computing power you have, in other words, it is determined by whether you have the more advanced computing equipment or not. This somehow widens the gap between the rich and the poor, for in the system, the rich are easier to get more advanced equipment to stand out in the computing power competition, and more tokens which are rewarded bonus go to their pockets. And now what is so embarrassing is that mining bitcoin are no longer that profitable, for according to Tom Lee, mining Bitcoin costs miners about $6000,  and if we calculates its profit using the current price of Bitcoin, there are only about $1000 left.

Therefore, the NEM debuts with its innovative consensus algorithm POI, which claimed to let the tokens goes to those “really” make contribution to make the transaction goes smooth. In POI, people are rewarded to those who simply help process the transaction and use their XEM as a payment when trade with others. So there is no computing power competition and people are rewarded for their “physical labor”, with nothing taking advantage of the equipment. So the CEO once claims that the NEM community is rather harmonious.

The improvement of POI and POW on the blockchain is a self-upgrading of the blockchain technology and the system, and they are still upgrading themselves by providing a better mechanism.

And here comes the HOdlcoin, which runs under the POW algorithm to organize the blockchain and also provide a new vision for users to make their tokens appreciates like the money in the bank account.

First, users holds their tokens in the wallet and the system starts to calculates the interest of their money under certain of interest rate. I think that what the system resemble as banks. People store their crytocurrency in the wallet and it will appreciate. Anyway, this also a way to earn tokens.