Several Important Concepts in the Crypto Field

• Cryptocurrency, or digital currency, is a form of currency that uses encryption technology to ensure security and privacy. It uses the principles of cryptography to encrypt transactions and ensure the security of transactions.
  • In cryptocurrency transactions, there are two key keys, namely the public key and the private key. They are a pair of keys generated through mathematical operations. Since these two keys are a pair and are not interchangeable, only the person with the private key can decrypt the information encrypted by the public key.
  • The public key is the address used to receive currency, which is public, and anyone can transfer currency into the account through this address. The private key must be kept secret because it is used to sign transactions, and only the person with the private key can sign the transaction, thereby confirming the authenticity of the transaction.
  • The principle behind public and private keys is asymmetric cryptography. Asymmetric cryptography is a type of cryptography theory. The principle of asymmetric cryptography is based on a mathematical algorithm called asymmetric encryption algorithm. The asymmetric encryption algorithm is used to generate a pair of public and private keys, and these two keys are not interchangeable.
  • The principle of asymmetric encryption algorithm is based on a mathematical concept called a one-way function. This function can map a data block to another data block, and this mapping is irreversible. For example, suppose there is a function f that can map a data block x to another data block y. The characteristic of this function is that the value of x cannot be derived from y. That is to say, if we know the value of y, we still cannot determine the value of x.
• The system used to achieve decentralization is blockchain. Blockchain is a distributed database technology used to record digital currency transactions or other forms of data. It ensures the security and integrity of data by dividing data into blocks and linking these blocks together.
• A block is the basic unit of a blockchain. It is a data structure used to store a set of ordered transaction information. Each block contains a hash value to represent the integrity of the block content. The block also contains a link to the previous block to connect it with other blocks.
• The hash value of a block is usually composed of the content of the block and the hash value of the previous block, and is obtained through a hash function operation. Hash operation is a mathematical operation that can map data of any length to a fixed-length hash value.
  • For example, suppose there is a block with the content “Hello world” and the hash value of the previous block is “abc123”. Then, we can splice these two values together to form “Hello worldabc123”, and then perform an operation through the hash function to get the hash value of the block.
• The person or organization that provides computing power for the blockchain system is called a miner. Their job is to solve complex mathematical problems by running specific computer programs to verify transactions and add them to the blockchain. Solving these problems requires a lot of computing power and usually requires the use of dedicated hardware, such as ASIC mining machines. Miners usually receive rewards from the blockchain system, which are usually digital currencies, such as Bitcoin.
• Deciding which miner to assign the blockchain task to is usually determined by the consensus mechanism of the blockchain system. For the blockchain system, the consensus mechanism is a method used to determine whether transactions on the blockchain are legal and decide how to add new blocks to the blockchain. Different blockchain systems may use different consensus mechanisms.
  • For example, Bitcoin uses the Proof of Work (PoW) consensus mechanism. Under this mechanism, miners need to verify transactions by solving mathematical problems. Miners usually decide who can verify transactions and add new blocks to the blockchain through competition. Miners will try to solve the problem and send the solution to other nodes. Nodes will check if the solution is correct, and if it is correct, they will accept the solution and add the new block to the blockchain. When miners complete the verification, they will receive Bitcoin rewards.
• In addition to POW, common blockchain consensus mechanisms also include Proof of Stake (PoS), Proof of Work with Weight, and Proof of Contribution, etc.

  • Proof of Stake (PoS): This is a new type of consensus mechanism that does not require miners to verify transactions by solving mathematical problems. Instead, it determines who can verify transactions and add new blocks to the blockchain based on the number of tokens held by the miner. This method is more environmentally friendly than Proof of Work because it does not require a lot of computing power. But it also has some disadvantages, such as the risk of oligopoly (that is, a few people control most of the tokens).

  • Proof of Work with Weight is a variant of the Proof of Work (PoW) consensus mechanism. It adds a weight parameter to the original Proof of Work consensus mechanism to improve the efficiency of the system.

    In the traditional Proof of Work consensus mechanism, miners verify transactions by solving mathematical problems. These problems are usually computationally intensive and require a lot of computing resources to solve. This means that miners need to have high-performance computing equipment to effectively participate in mining.

    In order to improve the efficiency of the system, the Proof of Work with Weight consensus mechanism introduces a weight parameter. This parameter is used to represent the computing power of the miner, that is, how much computing resources the miner has. When a miner wants to verify a transaction, the system will determine the difficulty of the problem based on the miner’s weight value. If the miner’s weight value is high, the difficulty of the problem will be higher; if the miner’s weight value is low, the difficulty of the problem will be lower. In this way, the system can assign problems based on the miner’s actual computing power, avoiding waste of computing resources.

    The Proof of Work with Weight consensus mechanism can usually improve the efficiency of the system. But it also has some problems, such as miners may cheat the system to increase their weight values to get more rewards. Therefore, the Proof of Work with Weight consensus mechanism also requires appropriate measures to prevent cheating.

  • Proof of Contribution is a consensus mechanism used to determine which miners can participate in mining and receive corresponding rewards.

    In the Proof of Contribution consensus mechanism, miners need to provide storage space and bandwidth to the system as a contribution. The system will determine the miner’s weight value based on the miner’s contribution amount, and multiply the weight value by the difficulty to get the miner’s “computing power”. When a miner wants to participate in mining, the system will determine the mining difficulty based on the miner’s computing power. Miners can get rewards by solving problems. The Proof of Contribution consensus mechanism can ensure the reliability and security of the system, and can effectively encourage miners to provide more resources for the system. But it also has some problems, such as miners may cheat the system to increase their weight values, or obtain improper benefits through other means. Therefore, the Proof of Contribution consensus mechanism also requires appropriate measures to prevent cheating.

Published at: Dec 10, 2022 · Modified at: Dec 11, 2025