Understanding Cryptocurrency Forks
February 12, 2025
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In the previous articles, we studied proof of work as well as proof of stake. We learned that the proof of stake mechanism was created in order to overcome the shortcomings of the proof of work mechanism. However, proof of stake itself has several shortcomings which have become increasingly visible over the years. In order to overcome those shortcomings, another mechanism called the proof of importance has also been created.
Proof of importance has been introduced by a cryptocurrency called NEM which is relatively obscure when compared to Bitcoin or Ethereum. However, since the mechanism has several advantages, it is becoming increasingly popular in the cryptocurrency market. In this article, we will have a closer look at the proof of importance concept and understand its advantages.
The proof of importance mechanism has been created in order to overcome the shortcomings of proof of stake. Hence, in order to understand proof of importance, we first need to understand the shortcomings of proof of stake. The three major shortcomings have been listed below:
The main purpose of the proof of importance mechanism is to overcome these two problems. The method which is used to overcome these problems has been listed below.
The proof of importance mechanism works in the following manner:
From the above-mentioned points, it is clear that the proof of importance mechanism does get rid of a lot of problems associated with the proof of stake mechanism. For instance, in this mechanism, the rich no longer get richer and the cryptocurrency actually behaves like a currency i.e. it keeps flowing amongst people instead of being hoarded and locked in digital wallets. Hence, it can be said that even though proof of importance is not a very popular concept today, it may soon be noticed by investors because of its merits and may end up becoming the predominant consensus mechanism in the future.
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