In cryptocurrency jargon, the term proof of capacity refers to a system in which data which has already been processed and added to previous blocks in a blockchain is stored and used as the foundation for the creation of subsequent blocks. Stored collections of data are known as plots.
When a transaction occurs, new data is added to existing plots to complete each new block, rather than processing all data in full. This system requires large amounts of data storage space, but relatively little processing power. Because new blocks are created using existing information, transactions can be completed very quickly.