What is Proof of Transfer?
Proof-of-Transfer is a new proposed mining mechanism (introduced in SIP-007) that uses the proof-of-work cryptocurrency of an established blockchain to secure a new blockchain. To participate in the consensus algorithm of a public blockchain, one must commit computational or financial resources. Mining mechanisms specify how resources are committed. For example, on a Proof-of-Work (PoW) blockchain, participants known as miners do some “work” that requires significant computing power and, in turn, are rewarded with that blockchain’s newly minted cryptocurrency. On a PoX blockchain, rather than committing computational resources, miners commit financial resources by transferring the PoW cryptocurrency of the more established blockchain to some other participant in the network. In turn, these miners are rewarded the new blockchain’s cryptocurrency.