Both Proof of Work and Proof of Stake are faulty: We propose a new concept — Proof of Identity

“Bitcoin wastes a lot of energy. And that waste is completely unmotivated — there is no reason for that. It’s just a bad design”. Our interview with Andrea Dalla Val started with these words of his.

Andrea is a fintech entrepreneur and a founder of Human Income Coin (HIC), a new blockchain network based on a new consensus, the Proof of Identity (PoID). He joined the blockchain community in 2015 and designed the PoID in 2021. The PoID white paper has been selected among the four top interesting searches in 2022 by the UCL — CBT.

The description of PoID may sound like a digital utopia. Everybody can join the network, using their biometrics as identification. Wallets are activated for free and receive coins daily as a basic income. Andrea expects them to have trading value in 2023.

Do you have questions about how it works? We do. So we asked Andrea, and here are the answers.

Why do we need Proof of Identity?

Bitcoin was the first cryptocurrency, made in a rudimental way more than ten years ago. The Proof of Work (PoW) is based on the concept that participants waste energy to prove their authentic credentials. It privileges companies running machinery on an economy of scale as opposed to individuals running their home computers.

Many say that Bitcoin is freedom and decentralized, but is that true?

As in the PoW concept, the voting power is assigned according to the energy wasted by each participating server, and these problems become inevitable and unsolvable:

1. The first one, as mentioned already, is energy waste, whose amount is proportional to the market cap of the blockchain. In 2021, Bitcoin’s carbon footprint was in the region of 80–100 million tons of CO2. That figure would be even higher if Bitcoin had a higher market cap.
2. The second problem is that individuals cannot compete against mining companies and therefore are impeded from participating in the validation network as their activity would result in an economic loss. This ultimately results in a concentration of power and poor decentralization. We, as single individuals, are not part of this system. We will never be part of this system. We are just users.
3. Because of the above, individuals have little incentive to adopt cryptocurrencies. Adoption is only driven by speculative purposes, and so it is slow, partial, and incomplete. Data shows that Bitcoin is actively used by a mere 0.1% of the population, despite having been the no.1 Google search in 2017.

After the PoW, we saw Proof of Stake (PoS). As it does not waste energy, PoS is very popular, but, again, it’s a way to do blockchain under the same wrong investment scheme.

In PoS, participation and voting power in the network are assigned according to the investment made on some resource. This creates a massive disparity between individuals and investing corporations, preventing the network from becoming decentralized.

Our proposed solution is simple: everyone is counted as one, and every individual receives a single unit of participation, voting power, and rewards. The Proof of Identity (PoID) is a validating network based on individuals instead of machines or stakes.

So, how does it work?

The challenge in the PoID consensus is to ensure that everybody is counted as one. We use biometric technology and identification parties to establish the unique liveness of each individual.

1. When you join our network for the first time, your face is scanned, and your data is encrypted.
2. The system will recognize you again at the next enrollment and redirect you to your existing wallet. Your unique liveness is your unique password to the network.  

Individuals cannot have more than one account in the system, and photos or video spoofs are detected and rejected by the system. The system can also identify users after surgeries or radical face changes.

The PoID network is democratic, decentralized, and globally adopted because everyone gets the same reward/incentive to participate. Because the voting power in the validation network is equally assigned among participants, there is no need to waste energy as proof, and there cannot be any concentration of power.

Biometrics often create concerns over the confidentiality of the participants. We solve this problem using an encryption method based on a decentralized setup, in which every encryption key is partitioned among a network of nodes.  When a face is scanned, the software does not record it. Instead, it encrypts it into a binary file which cannot be reverted because its encryption is spread on a decentralized setup. We call this binary file signature. 

One signature is one unit of voting power and associated reward (Human Income Coin). In the validation process, signatures are delegated to nodes, and nodes are servers run by individuals who want to get more involved in the system. At this stage, we are financing the project by selling the software to run one or more nodes, but in the future, we envisage a completely decentralized system free for everybody.

In the PoID, individuals are daily rewarded for their signature without any significant involvement from their side. Moreover, nodes can be run on a desktop and even on a mobile phone; we are the first blockchain offering this option.

PoID creates a universal basic income as the compensation that individuals receive because of their participation in the network, which makes it decentralized and censorship resilient.

How is the Human Income Coin better than Bitcoin?

The value of a currency, whether it is USD, ETH, or BTC, comes from people’s trust and usage. The more the adoption and the use, the higher the value of the currency.

Bitcoin and all current cryptocurrencies will never be people’s money because they are designed as an investment scheme that appeals only to a limited number of people. Most of the population is simply not interested in investing, especially in high-risk investments.

The Human Income Coin (HIC) has a much stronger preposition because it is distributed for free under a Universal Basic Income scheme. This paves the way to a global adoption and thus to a widely recognized value.

It is possible to envisage 100 million users in the PoID network, receiving their coins every day and willing to spend them, so creating a high value and a fair distribution for all. Today we have just 330 participants. However, we are probably growing exponentially: just eight days ago, we had only 50 participants, and now we have 50 new participants every day.

A possible forecast of HIC participants is:

• 2,000 by the end of August;
• 5,000 by the end of September;
• 15,000 by the end of October;
• 100,000 by February–March 2023;
• One million by the end of 2023.

Moreover, the Proof of Identity is a consensus protocol for all the current cryptocurrencies. PoID can be used for validating the networks of Bitcoin and Ethereum, and any other crypto, thus creating a unified, green, fair ecosystem for the entire blockchain industry.