Evolution of Consensus Method in Cryptocurrency Technology

Altcoin Magazine
Nov 4 · 6 min read

Decentralization is the major selling point of cryptocurrency technology. The ability to perform transactions without the help of a third party. Cryptocurrency came with the promise of being able to stand on its own and boasting of complete end to end encrypted digital security. To fulfill this promise, blockchain technology which is the host of the cryptocurrency system must employ a method of consensus that will be embedded into the framework of the platform to certify which transaction is genuine and which is not. Cryptocurrencies offer an unprecedented passive income with a new type of market.

There are about three methods of consensus in vogue now but the traditional method which was introduced alongside the blockchain technology is the Proof of Work (PoW). In this article, we shall explore various consensus mechanism, why there was a need for a new consensus technology and everything in between.

Proof of Work (POW)

The proof of work consensus mechanism explains a method of agreement on the blockchain technology platform where selected member called miners (or nodes) are positioned all over the world with one aim which is to validate the behemoth amount of transactions that takes place on the platform. The method used however involves the nodes solving increasingly complex mathematical algorithms. The faster you solve the more transactions you get to validate which translates to the reward.

The nodes are rewarded with the cryptocurrency coin on the platform in which they work. The beauty of PoW is that the nodes are scattered all over the world and as such no criminal assault can be perpetrated on the network. For such to happen, the person will need to have access to it at least 51% of the entire network. This was the joy of cryptocurrency until some mining farms around the world started getting big. Almost big enough to carry out digital pandemonium. This led to a review of the PoW system and consequently to the creation of the Proof of Stake (PoS) consensus framework.

The advent of the Proof of Stake consensus however brought to light two flaws of the Proof of Work consensus.

The framework PoW is set up such that access to about 51% of the consensus network can control the entire network. This means that the villains can create new blocks, reuse already used coins and confirm fraudulent activities at will. Though Bitcoin which is the most popular cryptocurrency is relatively safe from this kind of attack, the issue is facing the coins and tokens that do not have huge market capitalization.

For the blockchain network to keep running, nodes must be at work round the clock, competing to confirm a transaction and create blocks. This takes a whole lot of energy around the world which could be channeled to other use.

Proof of Stake (PoS)

The proof of stake explains a Blockchain consensus method whereby nodes will have to bid for contracts of creating new blocks by putting a portion of their own assets on the line. The higher the amount of asset you own, the more blocks is possible to be awarded to you. This system ensures that the nodes are real and that not just any member of the cryptocurrency network gets to create blocks on the network and mine new tokens.

PoS does not allow the creation of new tokens on the network but rather, the nodes on Proof of Stake network are called forgers. Though the name is associated to the technical system involved in the proof of stake but also because there is no need for devices that are used as mining rig on PoS again before transactions can be confirmed and rewards are given. The reward on the proof of stake consensus is usually more stable than the PoW and even sometimes rigid. Also, depending on how the algorithm of the network is written, the nodes may sometimes be paid transaction fees on each confirmation of transactions.

The switch to proof of stake from proof of work sometimes occurs when the PoW chain gets to a specified higher in the chains of the block. This creates a more conducive environment for the cryptocurrency community to grow. The proof of work system helps to create and vastly spread the token among users especially for new projects that need publicity but when there is a stability and market capitalization is on the high side, then the security of the network becomes the primary concern which brings in the use of the proof of stake consensus. Sometimes projects even take the decision to hard-fork the original currency to deploy a new one, more stable, more secure and ensuring long-term value and sustainability.

In 2012, PeerCoin became the first token to implement the hybrid collaboration if both the proof of work and proof of stake on the same platform.

To rule out the possible scenario of having cryptocurrency heavyweight investors and traders only had the opportunity to participate in the network processes, another measure was put in place to ensure that the crypto wealthy do not create the opposite of the decentralization foundation which cryptocurrency is built on. Phrases like ‘Randomized Block Selection’ and the ‘Coin Age Based Selection’ best captions the democratic proof of stake system.

Since the creation of the proof of stake, there have been other versions of the classic Proof of Stake which has been created to continuously improve the system. We can also quote Masternodes which are wallets with a full copy of a blockchain that is open and connected to the network 24/7, generating rewards for the owners. The demand for this kind of staking has been constantly increasing since 2017 and has led to the creation of several companies offering various services such as masternode hosting or coin staking.

Delegated Proof of Stake (DPoS)

DPoS uses a form of democratic consensus system which involves voting of acting delegates by token holders. It’s like electing someone into a political office. The acting delegates are then selected to create blocks and confirm transactions after which they get to share the proceeds with the token holders who voted them. A social system of character is used alongside with real-time online voting. The authority of a token holder which allows him voting right is dependent on how heavy his token wallet is. A sizeable amount of coins and tokens use this method including Lisk and Ark.

Leased Proof of Stake (LPoS)

Users on the Leased Proof of Stake are categorized into two: Full nodes and Half nodes. Full nodes are those who take part in mainstream hashing while half nodes simply lend their support in terms of token or coins to the full nodes. The workings of the LPoS is simple, half nodes who can’t participate in the consensus lend their coins or tokens to full nodes for a percentage of their rewards.

Anonymous Proof of Stake (ZPoS)

The ZPoS proof of stake method is also known as the “Stealth Staking” which provides a platform for users to stake anonymously. The method was pioneered by PIVX who created the ZPoS consensus using its ZeroCoin procedure. Tracking of transactions becomes increasingly difficult because immediately a zPiv is a pit in the staking line, four other zPivs are generated automatically which makes it possible to have freshly-minted Zpiv almost every minute without having to go through the stress of creating zPiv manually.


If there is anything to learn from the switch from proof of work to the proof of stake, it is that the cryptocurrency technological world has been saddled with a lot of responsibilities and fulfilling that obligation will never be a one-time tech solution thing. There has to be continuity in seeking better ways to protect the core value of the cryptocurrency community which is a promise of total decentralization. PeerCoin subtly started the race and now the cryptocurrency technology space must keep changing the baton, advancing to new heights again and again.


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Altcoin Magazine

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The best darn place to read and write about crypto and blockchain


The best damn place to read and write about crypto and blockchain.

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