 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. A blockchain can exist without proof of work. A blockchain can exist without a game theoretical, competitive consensus algorithm. However, it won't be a decentralized blockchain. It will require trusted third parties. These trusted third parties will be the ones doing the validation. Alternatively, you can consider a mechanism whereby the validation is done based on an alternative consensus algorithm, such as proof of stake. But in that case, you still have reward. It's reward in the form of fees for the risk taken for validating the rules and the cost of money locked up in that validation. You either have a reward system that allows you to have competition, proof of stake, proof of work, and the variance of that. Or you have a system without reward. But in that case, the validators must be trusted. Then you introduce centralization, trusted third parties. That kind of blockchain can exist, but it's not a blockchain. It's a database with digital signatures. A lot of banks are trying to do exactly that, to create a centralized database, and then call it a blockchain, so it appears very innovative, even though it isn't. Larissa asks, are blocks really an advantage in the blockchain? Do the blocks that have 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 just a single transaction? Is it possible to create a cryptocurrency without blocks? Yes, in fact, you can. In fact, 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 doing the proof-of-work on the granularity of a single transaction essentially means increasing the rates at which blocks are found. Let's say you did it. Each transaction was its own block, had its own proof-of-work, was changed to the previous transaction, minus just selected a single transaction, calculated proof-of-work on it, and issued that transaction. That is perfectly possible. The problem with it is that the rate of orphaned blocks increases dramatically. Right now, you can have a fork that occurs in the chain when a block is orphaned, because two blocks were found more or less simultaneously within a ten-minute window. If you make that ten-minute window five-minute, the number of orphaned blocks increases quite significantly. You have to account for that in the algorithm. There have been some attempts to shrink that all the way down to about 15 seconds, which is what Ethereum does. But Ethereum, in order to do that, has a special mechanism for accounting for orphaned blocks, and sharing the reward between multiple winners of the proof-of-work, if you like. If you went all the way down to a singular transaction, and you increased the throughput rate of transactions, you are now talking about doing a thousand blocks per second, each one, just one transaction, then 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, if you no longer care about proof-of-work, if the consensus algorithm is fundamentally different. We see that in distributed ledger technology, where it is signing instead of mining, where the energy requirement is zero, and where you can now essentially issue blocks as fast as you want, at which point you don't need blocks anymore. You can just chain transactions together, which is why a lot of people don't consider DLT's distributed ledger technology to be blockchains. They are not blockchains because they don't require blocks, and they don't require chains. Can the cost of energy be minimized by green energy? What about the economy of the whole world mining in such a case? Yes, in fact, green energy plays a very important role in mining, because one of the characteristics of mining is that it can occur anywhere, especially now that we have the ability to receive blocks by satellite. You can pretty much do mining anywhere in the world where you have energy, and that energy can come from any source. It can come from wind, solar, hydroelectric, dirty coal, nuclear energy, or any of these sources. But energy has different properties, and energy does not have energy, it is fungible, but energy production facilities have different properties. For example, solar produces the most amount of energy during the midday noon sun, and the least amount of energy at night, which is zero. Often, the amount of energy that is produced does not match the amount of energy that is consumed at those times. In fact, the most energy that is consumed in a city is usually around 8 or 9 pm in the evening, whereas the production of solar energy is not peaking at that time, it is near zero. How do you reconcile these two mismatches? Essentially, you have energy that is being produced for free once you have the capacity in place. The capital cost is in place. There is no operating cost for a solar energy system, other than a small maintenance cost. Therefore, if you are producing it in the middle of the day, nobody needs that energy, that energy is wasted. Mining can actually take that wasted energy and use it to produce income. That income allows you to very rapidly depreciate the capital expense of building the solar plant in the first place. You can take a solar plant that would otherwise be depreciated over a period of, say, 5 or 10 years, and you can depreciate it over a period of 1 or 2 years, which 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. For the miners who are mining on this energy, the cost of that energy can be much lower. The profitability can be much higher. Because mining can happen anywhere, mining will happen in the places where electricity is cheapest, where the difference between capacity and demand is the greatest, where the ability to distribute the electricity by other means, such as high-voltage distribution networks, exists less or doesn't exist at all, and all of those represent opportunities. In fact, that means that the greatest opportunities for mining are from sources of alternative energy, such as wind, solar, and hydroelectric, even geothermal, because those are the sources that are remote, often from populated areas, that are difficult to distribute because of the cost of distribution networks, and where there is a large mismatch between capacity and demand. Which means that Bitcoin is currently underwriting massive investments and alternative energy around the world. John asks, while I understand that the computing power used to generate the proof of work derives value from the very fact that it secures the Bitcoin blockchain, I was wondering if there are any workable solutions for diverting that computer power for bonus value creation, tackling problems requiring big computing powers. Are applications like protein-folding or finding sets of primes workable, or anything else workable in this space? Yes, in fact, there have been a number of systems that attempted to exploit the mining algorithm, the consensus algorithm, to do things that people consider useful, such as protein-folding or finding primes, etc. However, Bitcoin doesn't do that. Bitcoin uses an algorithm whose only use is for Bitcoin, really, and has no other practical use other than proving to the rest of the world that the miners have committed a certain amount of energy and therefore expenditure to back the security of the network. It is essentially the promise each miner makes. Here is a block. I have validated all of the transactions according to the consensus rules. I swear this under penalty of losing the energy that I have put in. Here is the proof of work demonstrating my commitment to securing and validating these transactions and obeying the consensus rules. That promise is in the form of energy consumed for the proof of work algorithm. Part of the problem with doing something else, something that other people might consider useful, is that that splits the reward. It means that 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 the Bitcoin security? What happens if there is a disruption in that network? For example, suddenly we find a new application for specific types of protein-folding, or specific types of prime numbers that make it extremely valuable to produce these numbers or proteins. The problem with that, of course, is that it is no longer worthwhile doing the security on the Bitcoin blockchain. It is only worthwhile using that equipment to do the protein-folding. It is more worthwhile to do the secondary function than it is to do the primary function. 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 did the security of validating the transactions. If you can't trust that promise, then Bitcoin securities fail. The whole idea of only doing this to secure Bitcoin is that you can trust that promise. It has no other incentive. There is no other reason you would be doing this calculation other than proving your commitment to doing the security of validating the transactions correctly. Bitcoin mining is useful in proving the security of the Bitcoin network. The more energy that is committed to proving that security, the more secure the network is, and the harder it is to attack or compromise the security of the Bitcoin network. Bitcoin's proof-of-work algorithm produces useful work. It produces the security that backs a global currency worth almost $15 billion, and it produces the security that ensures that that global currency cannot be attacked by any actor, however large they may be, without colluding and investing a lot of money in hardware and energy. That becomes very difficult, the more energy and the more hardware that backs Bitcoin security. That is the useful application of Bitcoin's mining. We only have one, because we want that to always be the dominant use of Bitcoin's mining, and never become second place to something else. Can I 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 outside of the system, in the form of work. That energy is a scarce resource. Energy has cost everywhere, anywhere, in any form. Proof-of-work forces miners to deposit that energy in the form of work, and prove that they have deposited that energy by producing proof-of-work in order to validate and claim a probability of a reward. Proof-of-stake does a similar function, only instead of requiring the validators to deposit energy in the form of work, it requires them to deposit cryptocurrency within the system in the form of a stake. They basically bet cryptocurrency. They get locked up for a certain number of blocks, and they put that behind their claim to validate the rules. If everybody agrees with the validation of their rules, they remain on the majority chain, and they get a small reward back in the form of fees in return for the stake that they put in, proportional to the stake they put in. If instead they find themselves on the wrong chain, depending on how proof-of-stake is implemented, they may lose some or all of their stake, or they may simply end up with their stake locked up for a while without being able to gain anything from it.