What it means
Proof of work asks participants to prove they have spent computing effort, while proof of capacity asks them to prove they have set aside storage. Hard drives are cheap compared with specialised mining machines, and once they are filled they use very little power, so the barrier to entry is lower.
The process begins with plotting. A participant uses their computer to generate large files of pre-calculated answers, called plots, and stores them on a disk.
This step takes time and computing power, but it is done once rather than continuously. When a new block is due, the network issues a challenge, and each participant searches their stored plots for the answer closest to it.
The participant whose answer is best, within a set time, wins the right to create the block and collect the reward. Because the work consists of looking things up, it needs little energy.
This design raises some questions. People with lots of cheap storage can gain a large share of the rewards, and hardware can be repurposed, so some projects worry about attackers renting large amounts of storage temporarily.
Some designs also add a proof of time element to make cheating harder. From a business view, the economics are about hardware cost and lifetime rather than electricity.
A buyer needs to compare the price of drives, the plotting effort and the expected reward, bearing in mind that the coin price and the network's total storage can both change rapidly.
In practice
Real-world examples.
Example
A hobbyist has four spare 10 TB drives and joins a proof of capacity network. She plots 40 TB and earns a modest, irregular reward that roughly covers her small electricity bill.
Example
A small data company with idle storage servers compares options. It calculates that filling 200 TB would cost about $4,000 in extra drives and that the expected reward would repay the cost in under a year, assuming the coin price and network size stay stable.
Example
A sustainability officer at a fund reviews crypto assets for an ESG (environmental, social and governance) screen. She notes that a proof of capacity network uses far less electricity than a proof of work chain of similar value, and approves it for further analysis.
Formula
Calculation
In a simple model, your chance of winning a block is your share of the network's total storage:
Expected blocks = (Your capacity / Network capacity) x Blocks per day
Suppose you commit 50 terabytes (TB) and the network has 1,000 TB in total. The network creates a block every five minutes, which is 288 blocks a day.
Your share = 50 / 1,000 = 5%.
Expected blocks per day = 5% x 288 = 14.4 blocks.
If each block pays a reward worth $20, your expected gross income is 14.4 x $20 = $288 a day, from which you would subtract the cost of drives, power and your time.Case study
Seen in the real world.
Stonefield Systems is an illustrative, fictional hosting firm with a data centre that has several hundred terabytes of unused disk space. The managing director wanted to know whether proof of capacity could turn the idle space into income.
The finance team estimated that dedicating 300 TB would give a 3% share of a small network and produce expected rewards of $9,000 a month. They then deducted $2,500 of monthly power and maintenance, leaving $6,500 before the cost of the plotting time.
The directors worried that the coin price could fall and the network could grow, so they approved only a three-month trial using 100 TB. The illustrative lesson is that the economics look attractive when hardware is already owned, but the result depends on assumptions that can change quickly.
Watch out
Common mistakes.
- Assuming proof of capacity needs no cost, when buying drives and spending time on plotting are real expenses.
- Using the current coin price and network size to project income for years, when both can change quickly.
- Believing that all unused storage is equal, when speed and reliability of drives can affect how well a participant performs.
Questions
People also ask.
Is proof of capacity the same as proof of space?
The two terms are closely related and often used for the same idea, in which a participant proves it has reserved disk space.
Why is proof of capacity said to be greener than mining?
Once the plots are created, the main task is reading stored data, which uses far less electricity than the continuous computation of proof of work.
Can I use the same drive for other things?
You can, but the space used for plots is reserved, so it cannot hold other data unless you remove the plots and lose your stored work.
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