Lately I have been “renting” out my hard drive space to make money in the forms of altcoins that I use to sell for bitcoin and then convert to USD. These 2 altcoins follow the proof of capacity rule which states:

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.