Proof of Transfer (PoX) Explained


When the initial release of Blockstack core was announced in 2015, it introduced a new concept of Blockchain over Blockchain. It used Bitcoin as an underlying Blockchain for the virtual Stacks Blockchain. It was a new concept. Blockstack had no intention of reinventing the wheel. Participants do not have to spend a tremendous amount of energy over mining instead it always believed that energy consumption should be reused. Proof of Transfer is the next step in this vision, with efficient consensus protocol and rewarding mechanism. Read more about Blockstack and Clarity.

Proof of Burn (PoB) in Stacks 1.0:

Stacks 1.0 Blockchain was launched back in 2018. In SIP-001 they announced that they’ll be using Proof of Burn (PoB) to process the transaction of virtual Stacks Blockchain over Bitcoin Blockchain.  

Every new block on the Stacks chain is chosen via cryptographic sortition (a function by which block is chosen after some cryptographic calculations). In every new Bitcoin block that gets mined, the burn from every participant is used to calculate “Probability distribution” (what is the percentage share of their burnt Bitcoins). "Verifiable random function (VRF)” (a cryptographic function which generates random verifiable outputs) does its sampling. The VRF gives us a random sample and that’s how it selects the winner. The winner collects the transaction fees as well as Stacks token in reward. 

Problem with PoB in Stacks 1.0:

Proof of Burn required participants to burn their Bitcoins to burn addresses, and in the initial days of the Stacks chain, the new cryptocurrency did not have enough value as the base cryptocurrency. So this bootstrapping can make miners unwilling to burn their Bitcoins. 

Proof of Transfer (PoX) in Stacks 2.0:


In January, Stacks 2.0 was introduced after the hard fork of Stacks 1.0. In SIP-007, a new consensus algorithm was introduced which is called Proof of Transfer(PoX). It generalizes the concept of PoB. Instead of sending Bitcoins to a burn address, miners send their base cryptocurrency to a set of predefined participants' addresses. 

This enabled the network participants to earn rewards in a base cryptocurrency for adding value to the new cryptocurrency. Also read: 5 Popular Consensus Algorithms used in Blockchain.

Selection of the winner:

The process of selecting a winning miner (i.e, the leader) is the same as it was in PoB (in stacks 1.0). Verifiable random function (VRF) generates a random sample using the “Probability distribution”. To calculate this, it uses the transfer of Bitcoins from every participant to a set of Bitcoin addresses. 

Determination of addresses:

In PoB mining the consensus algorithm didn’t need to determine an address where miners would transfer their Bitcoins. Because in every cycle it was burn address. 

However, in PoX, network participants must validate the addresses that they are transferring Bitcoins to. A set of Bitcoin addresses are iterated over in each reward cycle. In order to qualify for the reward cycle, an STX holder must:

How the reward cycle works:

In Stacks, Blockchain miners compete with one another by transferring Bitcoins to set Bitcoin addresses. Before every reward cycle, the Stacks network must reach a consensus on the valid recipients. As Stacks Blockchain has its own independent properties from Bitcoin Blockchain, this can lead to missing block data, experiencing forks etc. Because of which consensus becomes difficult. 

In order to overcome this problem, at the start of every phase two items are decided:

  1. Anchor block:
    The anchor block is a Stacks chain block.
  2. Reward set:
    This is a set of Bitcoin addresses that will receive the funds. Stacks chain state from anchor block determines the reward set. Reward set consists of Bitcoin addresses.

Verifiable random function (VRF) ensures that each miner has sent the reward to the same recipient addresses. If a miner sends funds which is not a valid address, the rest of the network ignores those transactions.
In order to reduce the complexity of the consensus algorithm, reward cycle lengths are fixed. If fewer addresses participate in the reward cycle then burn addresses fill the empty slots.


Proof of Transfer (PoX) bootstraps the concepts of PoB. This allowed participants who added value to the Stacks Blockchain to earn rewards. Other than that the participants can use these rewards to fund app mining. There’s still research going on to improve some factors of this consensus algorithm and one of those factors is how to increase bandwidth, as Stacks Blockchain uses Bitcoin transactions. One solution that has been a center of attention is “Lightning Channels” of Bitcoin Blockchain. In the future, there will be updates and many more things coming such as testnet for Stacks Blockchain.

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Why Blockstack is the future of the internet?

Blockstack has come up with the new revolutionary idea of a decentralized internet ecosystem, which will excel better in terms of privacy, performance, and reliability. Blockstack is a decentralized and a full-scaled, decentralized computing platform. But before we dive into what block stack is and how revolutionary their idea can be first let's discuss, what is happening on the internet right now?/

3 Major Technology Revolutions

There was 3 main era of computing that we have seen. In each phase, we saw one company took the advantage to grow giant.

  1. Hardware Era: This is when IBM became the king and focused mainly on controlling hardware.
  2. Desktop Computers Era: While IBM was only focusing on the development of hardware aspects, Microsoft came in and started charging people with a license fee for using their software on their PCs. Microsoft addressed the need for growing software requirements for personal computers and still has sustained its position in the software market.
  3. Cloud Era: Cloud Era has always been about controlling information, tech giants like Google, Amazon, and Facebook stepped in cloud computing where they could have user's information and sell it. Services like Google Cloud, Dropbox and Facebook weren't that free for sharing data.

If you are not paying for it, you're not the customer; you're the product being sold   (Andrew Lewis)

Now the major problems are:

  1. Mass data breach resulting in millions of people affected.
  2. Loss of user's privacy due to hand over all their private data while using these applications.
  3. Selling of Information for monetization, they resulted due to mistrust of major tech companies

Blockstack is coming up with the 4th major revolution, developing a decentralized ecosystem for the internet!

Why is Blockstack Future of the Internet?

Blockstack is a full-stack solution to traditional cloud computing, designing, developing and expanding a decentralized computing network. Basically, Blockstack re-imagines the traditional Internet app layer and offers a fresh decentralized network for apps; Blockstack apps allow users to have their information directly owned and monitored on their devices rather than handing over to single entities to store it.

How Blockstack Our Works

Currently when you are connected to the internet here is how things work. You open the application on your browser, which is being hosted on a server machine in some X location. This server helps you to run the application on your laptop screen, and all the data that you create while interacting with that application will be stored on that server owned by some company.

Blockstack changes this cycle. Users will run the DECENTRALIZED APPs on their local machine, which means meaning that they are not connecting to servers in X location, on Blockstack they are connecting to your localhost, which is a much faster connection, and their machine is just running the code under the hood. As it does you generate stacks for the work your machine is doing.

What are Stacks on Blockstack?

Stack tokens 'fuel' blockstack features. When a user registers digital assets, like usernames, or when they register/execute smart contracts. Using Stacks, developers can build and distribute apps that let users maintain ownership of their data and protect their digital rights.[1]

Users are now using blockstack network and it uses stack tokens to run the recourse usage. Considers simple example to understand this: If some user is let's say 10 feets away from your device and he downloads an app, he/she is more likely to download it from your device, as your device is nearest to him connected to the network, and you will get a reward in form of stack tokens.

But what about users on a mobile device?

They surely don't have enough resources to run these intensive operations on their mobile devices, then they will need to spend some stack tokens in order to access this application. Your computer will execute that code and for this again you will get paid in stack tokens. Basically your computer will run as the nearest server to them and you'll get paid for serving those apps.

Features of Blockstack:

User-owned identity:

No more worries about your identification and privacy matters, blockstack uses blockchain based security protocoles to make sure your identity is safe. Now, no more third parties will control your information, only you control it!

True data ownership

Relax with Blockstack because your information is 100% private and only apps or other users can be accessed. Millions of users each year had to go through the pain of data piracy and violation of their private data. But things, are changing now. With Blockstack, Don't worry again about violations of privacy.

One ID, 100s of apps

Discover a world of fresh applications that respect your digital rights. Share, exchange, and link information between applications as you like. All of the Apps on Blockstack will be used with a single identity. You don't have to go through the pain of managing multiple ids in order to use each application.

With all-new features, Blockstack will be our more trustworthy and far more efficient internet network than the one we use today. It has already taken a lot of attention and once it takes over, it will change how we interact with the application. In the future, We can expect more control on our information than ever before.

Have a look at the road map of Blockstack


[1] Stacktokens

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