Proof-by-Location as a Socially Responsible Financial Infrastructure

Abstract

The Proof-of-Work algorithm that underlies Bitcoin and many other cryptocurrencies is well known for its energy-intensive requirements. The Proof-of-Stake algorithm that underlies Ethereum2 and various other cryptocurrencies is less impactful environmentally, but it has a second, looming issue: the problem of wealth inequality. We have developed an alternative to Proof-of-Work and Proof-of-Stake, called Proof-by-Location, that has the potential to address both of these issues. This paper describes Proof-by-Location and a financial platform called Xylem that is based on it. This platform seeks to distribute transaction fees to billions of cryptocurrency "Notaries" around the world (essentially, anyone with a smartphone), who work together to establish a distributed consensus about financial transactions. Using Xylem as a global financial infrastructure could lead to significantly better social and environmental outcomes than existing financial platforms.