A cryptocurrency has a distributed ledger called a blockchain. The blockchain keeps track of every transaction that occurs across the cryptocurrency. This blockchain must stay up-to-date and verified–which requires someone in the network to do that validation.
Bitcoin and Ethereum use the proof-of-work algorithm. Miners do computational work to validate the legitimacy of transactions across the network, and in return they are given cryptocurrency as a reward for that computational work.
In the future, cryptocurrencies could move towards a proof-of-stake model. If you own a significant amount of cryptocurrency, you have incentive to keep the validity of the blockchain up to date. Proof-of-stake algorithms can be significantly less energy intensive.
Vlad Zamfir is a researcher for the Ethereum Foundation, and he joins Haseeb Qureshi for a conversation about cryptoeconomics. This is an in-depth conversation between two active blockchain developers. We hope you enjoy it.
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