Proof of Capacity (PoC), or Proof of Space, is a consensus mechanism used to prove that a miner has dedicated a sufficient amount of their physical storage to a given endeavor. While Proof of Stake and Proof of Work methods use stake size and computing power, respectively, to determine who is able to verify a transaction, PoC methods use available storage space to do so.
As in PoS and PoW models, miners in PoC systems must solve a cryptographic puzzle to gain mining rights. PoC systems work by placing possible solutions to a cryptographic puzzle on the storage space a miner had dedicated to this endeavor. The larger the storage space, the more possible solutions can be stored on it, thus, the greater chance of solving the puzzle and earning a block reward.
Data can be wiped from one’s storage at any time, then the storage can be used for other purposes. A possible advantage of PoC models is reduced energy consumption (1/30 of that consumed in BTC mining). Disadvantages may include the possibility of malware being downloaded onto one’s hard drive. An example of a PoC system is the Chia Network.