Whereas Bitcoin secures its network using a Proof of Work (PoW) algorithm, and Bitshares uses Delegated Proof of Stake (DPoS), OmniCoin uses an algorithm we are calling Proof of Participation (PoP). The group of users who are eligible to process transactions are chosen based on a “participation index” computed based on that user’s participation in various parts of the OmniBazaar marketplace. Users who are participating the most in the marketplace have the most to loose by producing invalid/fraudulent blocks. Basing the “participation index” on several factors provides incentives for broad participation in marketplace activities that are beneficial to the network.
Components of the Participation Index
- Being a Publisher of listings for other users counts as "participation".
- Being known and Trusted by other users (this is essentially the DPoS “Delegate” system of BTS)
- Reliability as a transaction processor whose node is always available
- Reputation as a user of the OmniBazaar marketplace
- Dissemination (based on number of new referrals to OmniBazaar)
- [Future] — Voluntary proof of identity (Web of Trust system) might be tied to the “Trust” component above.
Basing the “participation index” on several factors provides incentives for broad participation in marketplace activities that are beneficial to the network. Because "Proof of Participation" includes the features and safe-guards of the successful DPoS system, we believe it to be even stronger and more effective than DPoS.