A New Proof of Work Asset Class

11/07/24

Reference to crypto assets in this article are for informational purposes only and should not be taken as financial advice.

We propose an alternative style of PoW protocol, Zero-Knowledge Proof of Work (zkPoW), which corresponds to a new asset class of zkPoW base layer coins and zkPoW ecosystem assets. A zkPoW protocol creates incentives that channel energy consumption toward verifiable general-purpose computation. We introduce Nockchain, the first zkPoW protocol, alongside $NOCK, its base layer coin. Uniquely in Nockchain, zkPoW incentivizes practical computation that secures the protocol and eventually powers its transaction-processing.

Scarce, non-sovereign-issued, decentralized digital assets were once a fringe idea, but today, the largest financial institutions in the world describe them as a flight to safety. Broadly speaking, there are two categories of digital assets: base layer protocol coins and ecosystem assets built with base layer affordances. Among base layer protocol coins, there are two primary approaches to achieving trustless consensus, which correspond to two emergent ecosystems: Proof of Work (PoW) and Proof of Stake (PoS).





┌──────────────────┬──────────────────┐ │ │ │ │ │ │ │ │ │ │ PoW-ecosystem │ PoS-ecosystem │ │ Asset │ Asset │ │ │ │ │ │ │ │ │ │ ├──────────────────┼──────────────────┤ │ │ │ │ │ │ │ │ │ │ PoW Coin │ PoS Coin │ │ │ │ │ │ │ │ │ │ │ │ │ └──────────────────┴──────────────────┘

Among base layer tokens, PoW has 70%, or $1.56T, and PoS has 30%, or $595B, of value by market cap. In PoW, virtually all value has accrued to Bitcoin, a base layer coin, whereas in PoS, a more heterogeneous set of financial experiments is occurring, accounting for an additional ~$500B in value in PoS-ecosystem assets. PoW and PoS base layer coins have fundamentally different economics, and their respective base layer economics impact all ecosystem assets.

PoW protocols use tokens to incentivize energy consumption

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