Steps in Setting up a Blockchain
When it comes to setting up blockchain, experts in this space say you need to identify your use case and your overall objectives.
Where is the trapped value? Once identified, companies move to proof of concept; select the platform (e.g. IBM Blockchain; Hyperledger Fabric; R3 Corda; Ripple; Ethereum; Microsoft Azure Blockchain); build; test; and run.
Companies seek to choose the consensus mechanism – all computers in a crypto network need to agree about which transactions are legitimate, via ‘proof of work’, or ‘proof of stake’. Generally, proof of stake blockchains employ a network of “validators” who contribute — or “stake” — their own crypto in exchange for a chance of getting to validate new transaction, update the blockchain, and earn a reward.
To explain, in proof of work, the penalty for miners submitting invalid information, or blocks, is the sunk cost of computing power, energy, and time. In proof of stake, the validators’ staked crypto funds serve as an economic incentive to act in the network’s best interests. In the case that a validator accepts a bad block, a portion of their staked funds will be “slashed” as a penalty. The amount that a validator can be slashed depends on the network.
Growing in numbers, experts and academics are suggesting that proof of work will become a thing of the past as it is difficult to scale and requires a large amount of time and energy to create the next block (also negatively impacting sustainability goals).
Credit: Coinbase "What is proof of work or proof of stake?"