"How does a free blockchain work?"
"In Bitcoin, the miners are rewarded, but in a blockchain to keep contracts, who will do the validation?"
"Can a blockchain exist without miners?" Yes, a blockchain can exist without...
miners, proof-of-work, or a game theoretical competitive consensus algorithm.
However, it won't be a decentralized blockchain.
It will require trusted third parties who will be the ones doing the validation.
You can consider a [blockchain] whereby the validation is done based on an alternative consensus algorithms...
such as proof-of-stake, but in that case you still have a reward in the form of fees,
for the risk taken in validating the rules and the cost of money locked up in that validation [process].
You either have a reward system [based on] competition -- proof-of-work, proof-of-stake, and variants of them --
or you have a system without reward, but in that case the validators must be trusted.
You re-introduce centralization and trusted third parties.
That kind of blockchain can exist, but it is not really a blockchain. It is a database with digital signatures.
A lot of banks are trying to do exactly that, create a centralized database and call it a "blockchain."
It [sounds] very innovative, even though it isn't.
"Are blocks really an advantage in the blockchain? "Do blocks formed in the blockchain need to exist?"
"If every single transaction was validated by itself, wouldn't that solve the block size problem?"
"Wouldn't it be faster to validate [each] transaction? Is it possible to create cryptocurrency without blocks?"
Yes, you can. Many of the systems that use a decentralized signing algorithm...
instead of a proof-of-work mining algorithm don't really need blocks.
Blocks are needed for proof-of-work, because [calculating] the proof-of-work on the granularity...
of [more than one] transaction [per] second would mean increasing the rate at which blocks are found.
Let's say [you had a blockchain where] each transaction was its own block, had its own proof-of-work,
and was chained to the previous transaction.
Miners would select a single transaction, calculate the proof-of-work, and [broadcast] that transaction.
That is perfectly possible, but the problem is, the rate of orphaned transactions / blocks increases dramatically.
Right now, [Bitcoin] sees a [small] fork that [regularly] occurs in the chain when a block is orphaned...
because two blocks were found more or less simultaneously within the ten-minute window.
If you make that ten-minute window a five-minute window, orphaned blocks increase significantly.
You [would need] to account for that in the algorithm.
There have been some attempts to shrink that [window] all the way down to fifteen seconds,
which is what Ethereum does.
But in order to do that, Ethereum has a special mechanism for accounting for orphaned blocks,
sharing the reward between multiple winners [finding] the proof-of-work.
If you [calculated the proof-of-work] for singular transactions, and then increase the throughput...
rates of transactions, [that would involve] a thousand blocks per second, each one just one transaction.
The problems with forking the network and synchronizing it become insurmountable.
The only way you can do that is if you no longer care about competition between miners and proof-of-work.
If the consensus algorithm is fundamentally different-
We see that in distributed ledger technology where [consensus is done through] signing instead of mining,
and the energy requirement is zero.
[With that model], you could issue blocks as fast as you want, at which point you don't need blocks anymore.
You can just chain transactions together.
This is why a lot of people don't consider distributed ledger technology (DLTs) to be blockchains.
They are not blockchains because they don't require blocks or chains.
"Can the cost of energy be minimized by green energy?"
"What [if] the [mining] economy [throughout] the world [was] mining [with green energy]?"
Yes, green energy plays a very important role in mining.
One of the characteristics of mining is that it can [technically] occur anywhere,
especially now that we have the ability to receive blocks by satellite.
You could pretty much mine anywhere in the world where you have [an available energy source].
It can come from wind, solar, hydroelectric, dirty coal, or nuclear energy. It can come from any of these sources.
Energy is fungible, but the generation of energy and energy production facilities have different properties.
For example, solar produces the most amount of energy during the midday sun, and the least amount at night,
which [will be] zero.
Often, the amount of energy produced does not match the amount of energy consumed at those times.
In fact, the most energy consumed in a city is usually around 8 or 9pm in the evening,
whereas the production of solar energy is not peaking at that time, but near zero.
How do you reconcile these mismatches?
You have energy being produced for free once the capital costs and capacity are in place.
There are [low] operating costs for solar energy other than maintenance costs;
therefore, if you are producing it in the middle of the day and nobody needs it, that energy is wasted.
Mining can take energy [that would normally be wasted] and use it to produce income,
which allows you to very rapidly depreciate the capital expenses of building a solar plant in the first place.
You can take a solar plant that would otherwise have depreciation over a period of five or ten years,
and instead depreciate it over a period of one or two years.
This leads to an enormous investment in solar.
If you can depreciate the cost of the underlying capital, that makes the deployment of solar much cheaper.
Of course, the miners who are [using this energy for] mining, the cost of that energy can be much lower,
so the profitability can be much higher.
Because mining can happen anywhere [there is an energy source], mining will happen in the places...
where electricity is cheapest, where the difference between capacity and demand is greatest,
and the distribution networks [for other use cases] exist [poorly] or don't exist at all.
All of those [factors] represent opportunities.
It means that the greatest opportunities for mining are from sources of alternative energy:
wind, solar, hydroelectric, geo-thermal.
Those energy sources are often remote and difficult to distribute due to the cost...
of [building] distribution networks, and where there is a large mismatch between capacity and demand.
Bitcoin is currently underwriting massive investments in alternative energy around the world.
"While I understand that the computing power used to generate proof-of-work derives value...
from the fact that it secures the Bitcoin blockchain, I was wondering if there are any workable solutions...
for diverting that computing power for bonus value creation, tackling [other] problems that require...
[a lot of] computing power."
"Are applications like protein folding or finding sets of primes workable in this space?"
There have been a number of systems that have attempted to [use] the mining consensus algorithm...
to do things that people consider ["more useful"], such as protein folding or finding primes.
Bitcoin doesn't do that. Bitcoin uses an algorithm which has no other application other than proving...
to the rest of the world that miners have committed / expended a certain amount of energy...
to back the security of the network.
That is essentially the promise each miner makes.
'Here is a block. I have validated all the transactions according to the consensus rules.'
'I swear this under penalty of losing the [reward for the] energy I have [expended], and here is the proof-of-work,
demonstrating my commitments to validating these transactions and obeying the consensus rules.'
That promise [comes] in the form of energy consumed for the proof-of-work algorithm.
The problem with doing something else [in addition] that some other people might consider useful,
is that it splits the reward, meaning the miners have two reasons for which they are mining.
One is to secure the network, and the other is to produce protein folding signatures or large primes.
What happens if the production of primes becomes more valuable than securing Bitcoin?
What happens if there is a disruption in that network? For example, we find a new application for specific...
types of protein folding or prime numbers that make it extremely valuable to produce [them instead].
Well, at that point, it would not be worthwhile doing the security of the Bitcoin blockchain.
Using that equipment for doing the protein folding would be more worthwhile, even as a secondary function,
and Bitcoin security ceases being the primary function, at which point you can no longer trust the promise.
The promise being, 'I committed this energy to prove that I [backed] the security [of the network]...
by validating transactions.'
If you can't trust the promise, then Bitcoin's security fails. The [purpose of proof-of-work] is to secure Bitcoin.
You can trust the promise because it has no other incentive or reason you would be doing this calculation..
other than proving your commitment to the security of Bitcoin by validating transactions correctly.
Bitcoin's mining is useful in [backing] the security of the network.
The more energy that is committed to that security, the more secure the network is, and the harder it is...
to attack or compromise the network.
Bitcoin's proof-of-work algorithm produces useful work for securing a global currency worth almost $15 billion,
that ensures it cannot be attacked by any actor, however large they may be,
without colluding and investing a lot of money in hardware and energy resources.
That becomes very difficult the more energy and hardware [there is] backing Bitcoin's security.
[Security] is the useful application of Bitcoin's mining; [it is] the only application because we want it to...
always be the dominant use of Bitcoin's mining, and never become secondary to something else.
"Can you explain the most important differences between proof-of-work and proof-of-stake?"
Very simply, proof-of-work requires the investment of energy, which is [a property] outside of the system.
Energy is a scarce resource that has costs [to produce and distribute], everywhere, in any form.
Proof-of-work [incentivises] miners to deposit that energy [as fuel for computation];
to prove that they have deposited that energy, they produce a proof-of-work in order to claim a reward.
Proof-of-stake has a similar function, but instead of requiring validators to deposit energy, it requires...
a deposit of cryptocurrency, which is within the system, in the form of a stake.
They basically bet [an amount of] cryptocurrency that is locked up for a certain number of blocks.
They put [that deposit of cryptocurrency] behind their claim, in order to validate the rules.
If everybody also agrees with their validation of the rules, they remain on the majority chain...
and [receive] a reward in return, and [in proportion to], the stake that they put in.
If they find themselves on the wrong chain, depending on how the proof-of-stake [algorithm] is implemented,
they may lose some / all of their stake, or have their stake locked up for a while, without being able...
to gain anything from it.