Blockchains are unique in the way consensus is reached. Consensus mechanisms are protocols that ensure all nodes are synchronized with each other and agree on which transactions are legitimate and added to the blockchain.
The main consensus models:
Proof-of-Work or PoW systems are great for securing valuable assets with their “unforgettable costliness” protection. PoW is a measure to deter denial-of-service attacks and other service abuses, such as spam, on a network by requiring some work from the service requester. Proof-of-Work is one of the biggest ideas behind Nakamoto’s Bitcoin whitepaper because it allows trustless and distributed consensus. The proof-of-work concept relies on mining (solving a computationally intensive puzzle) to validate the transaction and create new blocks.
Did you know?
The popularity of mining reached its peak during the bull market of 2017. It was almost impossible to find a mid-tier Radeon RX graphics card with a Polaris chip or getting even spare parts. This great demand for cards caused a price increase and made them inaccessible to ordinary users, and got miners a lot of hate from gaming communities.
Proof-of-Stake is a category of consensus algorithms designed for public blockchains that depend on a validator’s economic stake in the network. PoS systems can facilitate much faster transactions at scale.
From an algorithmic perspective, there are two POS types:
BFT-style Proof-of-Stake (PoSv3) algorithms use the UTXO model and longest chain consensus rules, similar to BTC. They replace PoW with proof-of-ownership of coins. The creator of the next block is chosen through various combinations of random selection and the wealth or age and the stake the coin owner has. The concept states that one can mine or validate block transactions depending on the number of coins held. The more coins owned by a miner, the more mining power they have.
BFT-style Proof-of-Stake algorithms randomly assign validators the right to propose blocks. In this process, the assigned validators send a “vote” for a specific block during each round. Validators permanently agree on whether or not any given block is part of the chain through this voting mechanism, the highest voted block is validated and becomes part of the blockchain. Consensus on a block can come within one block and does not depend on the length or size of the chain after it.
Delegated Proof-of-Stake (DPoS) is a consensus algorithm maintaining irrefutable agreement on the truth across the network, validating transactions and acting as a form of digital democracy. DPoS is a variation of the Proof-of-Stake consensus. This system seeks to reach consensus more efficiently. In DPoS systems, users “vote” to select “witnesses” and the ones that receive the most votes earn the right to validate transactions.
Did you know?
Proof-of-Stake systems are more energy-efficient than Proof-of-Work systems, making it more environmentally friendly.
Federated Byzantine Agreement (FBA). In FBA systems, each node does not have to be known or verified ahead of time, membership is open and control is decentralized. Node operators choose who they trust. System-wide quorums emerge from decisions made by individual nodes operators. FBA is used for its high throughput, network scalability, and low transaction costs.
Did you know?
A part of the inspiration for Blockchain technology comes from… the Byzantine army!
In computer science (specifically in a distributed computer system), the Byzantine Fault answers to a problem of trust and strategy: How does one communicate between two or more parties and an enemy. How consensus can be found in this configuration?
The Byzantine Generals Problem tried to answer that question in 1982 by creating an algorithm that permitted them to reach consensus.
Other Consensus Models
There are other Consensus models. These models include:
Proof-of-Capacity (PoC) requires only available capacity in the hard drive, but the more space you give, the more you have “plots” of data you have. These “data plots” determine your chance to mine a block. PoC is alternative solutions to the problem of high energy consumption in proof-of-work (PoW) so it can be considered as eco-friendly.
Proof-of-Capacity is similar to Proof-of-Space.
Proof-of-Believability (PoB) In PoB, the node is validated based on its past contributions and behaviors. Each node has a score and is selected randomly to validate blocks. The randomness is increased by the node’s score.
Proof-of-Elapsed-Time (PoET) requires little energy and permits everyone to participate in the consensus. The cost is proportional to the value gained.
Proof-of-Authority (PoA) works with approved accounts or validators as they are called.
This is a modified form of Proof-of-Stake, where instead of stake, a validators identity performs the role of stake, unlike PoS, there’s only one identity per person. The reputation of a validator is related to identity. PoA is similar to Proof-of-Believability, except that accounts must be approved. The approbation is given by the notaries who already have their identity information freely accessible in the public domain. As public databases of licensed notaries and the POA Network verification DApps are independent of each other, forging information on either side will prevent a candidate from becoming a validator.
Proof-of-Replication systems require the miners to prove that they store a copy of the data. This is a new kind of Proof-of-Storage that can be used to prove that some data has been replicated to its own uniquely dedicated physical storage. Enforcing unique physical copies enables a verifier to check that a prover is not deduplicating multiple copies of some data into the same storage space. (HDD, Server, Cloud storage..)
Proof-of-Burn (PoB) The idea behind PoB is that miners should show proof that they burned some coins — that is, sent them to a verifiably unspendable address. Proof-of-burn cryptocurrencies work by burning proof-of-work mined cryptocurrencies. It’s an alternative consensus algorithm that tries to address the energy consumption issue of POW. PoB is often called PoW without energy waste. It works on the principle of allowing the miners to “burn” or “destroy” the virtual currency tokens, which grants them the right to write blocks in proportion to the coins burnt.
The objective of this mixed consensus is to capture the benefits of the respective approaches and use them to balance each other’s weaknesses. The hybrid algorithms theoretically should have a higher level of security when compared to systems with PoW\PoS consensus. Most famous Hybrid PoW / PoS Consensus Algorithm is Ethereum’s Casper.
Proof-of-Identity, Proof-of-Importance and many others are yet to come. Whatever the future brings, we should defend the decentralized nature of a blockchain, no centralized authority should verify and updates the ledger with new transactions.
Did you know?
Horizen Blockchain is NOT a hybrid model PoW and PoS.
In this particular case, miners are forging and validating blocks by PoW and node operators are validating blocks. This aims to be more scalable, secure, and decentralized!
Consensus mechanisms are at the heart of blockchain technology. They permit this technology to be trustless and guarantees its immutability. Consensus mechanisms are always evolving and changing, even if you have a popular consensus, new ones emerge, bringing new ideas in the industry. That’s the charm of blockchain; people learn and try their own things. Is there a best consensus or is the true strength of consensus mechanisms the ability to transform eternally? One thing is for sure, I want to see what the future holds for this fascinating technology.
Which type of consensus do you prefer? Are there some missing from the list? Share your ideas with us in the comments section below!