Tuition Coins are built on the Cardano blockchain and exist as pre-minted assets. Before discussing why we chose Cardano as the preferred blockchain for Tuition Coins, it is crucial to understand the concept of Proof of Stake.
Proof of Work (PoW) and Proof of Stake (PoS) are consensus algorithms that secure the blockchain and validate new cryptocurrency transactions, thus making it challenging for bad actors to commit fraud. Both algorithms require participants to prove that they have contributed resources such as energy, computing power, or funds to the blockchain. However, there are some differences between the two. The primary distinction is how the blockchain algorithm determines and selects users to add transactions to the blockchain.
Proof of Work (PoW) consensus algorithms use complex computational problems that can be solved by miners using high-performance computers. The solution is found through a process of trial and error, and the first miner to successfully solve the puzzle or cryptographic equation is authorized to add new blocks to the blockchain for transactions. Once the blocks are verified by miners, digital currency is added to the blockchain and the miners are rewarded with coins.
However, PoW systems require powerful computers that consume a significant amount of energy resources. As the cryptocurrency network grows, transaction times may slow down due to the high energy consumption and electricity usage required. This presents a challenge for the scalability and sustainability of PoW-based blockchain networks.
Proof of Stake (PoS) operates differently from Proof of Work (PoW). Miners in a PoS system must commit to investing in the digital currency before validating transactions. To validate blocks, miners must use their own coins and also show that they have verified the transaction. The selection of who validates each transaction is determined randomly through a weighted algorithm based on the miner's stake size and validation experience.
Once the block is validated and added to the chain, the miner receives cryptocurrency as compensation, as well as their initial investment. However, if the miner fails to validate the block correctly, they risk losing their stake or coins. This incentivizes honest behavior, as tricking the miner into betting their coins makes it less likely for them to engage in theft or other scams, adding another layer of security to the system.
Cardano has a wide array of advantages. Below are 4 of the most important ones compared to competitors in the crypto sphere.