Consensus Algorithm Analyze
Since the blockchain is a decentralized system with no final decision makers, it is important to implement a mechanism that allows network members to reach consensus. Consensus is the collective decision-making process, and all system members are willing to make joint decisions for the benefit of the entire group. The decision method itself is also called a consistency algorithm. In this case, key aspects include consistency, everyone’s participation, cooperation, and equality of all votes. Distributed networks utilize a variety of algorithmic models that allow network members to agree. Implementations of any given system provide certain benefits to network members, such as increased network speed or low failure rates. However, since some technologies that support any particular positive aspect can offset other important metrics, the pros and cons are never excluded. We analyzed the most popular consensus algorithm models currently used in decentralized systems, trying to find out which ones are the most reliable and most effective.
PoW (work proof)
Scope of application:
Bitcoin, Ethereum, Litecoin, Dogecoin, etc.
The proof of work algorithm is the most commonly used consensus mechanism on the blockchain, especially since it is used in Bitcoin and Ethereum platforms. The bottom line of the algorithm is that the network node must perform computationally intensive operations to prove the transaction and add it to the pool. The output is easily comparable to other network calculations. The first node that completed all necessary calculations was rewarded for the work done, so the system members competed. It should be further emphasized that the scope of work to do so is always an expected measure.
Advantages of PoW:
● For Sybil attacks, users maliciously create fake nodes to suppress true honest users. However, the probability of error creation is equal to zero because computational performance is the basis of proof of work and is associated with the physical world.
● For the above reasons, the proof cannot be forged or stolen.
● Since each new block needs to start a new calculation round (each new block contains a link to the previous one), the proof cannot be obtained in advance.
● Reward distribution is honest. The amount of the award is directly dependent on the miner’s hash rate (calculation performance). Miners are always allocated to the mining area on a pro rata basis.
● The motivation for fair competition. Because mining costs are significant and relatively high and unfair practices deprive members of profits, miners can gain additional incentives to abandon their malicious behavior.
The system is fairly clear and easy to understand. It still has some major drawbacks.
Disadvantages of PoW:
● Huge energy costs. The system is designed to ensure ever-increasing task complexity, so computing requires more and more energy and computational performance, which is further wasteful — the only transaction added to the block is from the first node to the completion of the calculation.
● vulnerable to 51% attacks. Entities that have access to more powerful computing systems can dig more and potentially pose a centralized threat. Even now, 65% of the bitcoin hash rate is shared by five pools. This is a potentially dangerous situation: their combined forces (if any) may cause 51% of attacks to be launched, resulting in a malicious majority being able to ignore the interception of all remaining miners. Experts guarantee that larger systems are immune to this situation, and smaller blockchains with fewer network members still face some risks.
● The possibility of creating a fork. The updated transaction log is defined as a blockchain with the greatest aggregate complexity of proof of work. Therefore, members search for new blocks on top of existing blocks. However, since calculations run in parallel, the possibility of creating forks cannot be ruled out, although their expected creation in the current environment is uneconomical.
● Calculation takes a long time. This results in a significantly slower transaction process, thus making systems with such a consensus mechanism unsuitable for micropayments or quick remittances.
PoS (share certificate)
Scope of application:
VCash, BitBay, Peercoin, Qtum, Stratis
If the system uses the Proof-of-Stake algorithm, it is better to talk about the validator, the network member, not the miner. In order to confirm the transaction and add it to the pool, the validator locks in part of the funds by converting them to shares that may be added to the blocks of the network. This mandatory collateral is fixed and is intended to ensure any possible misconduct by members of the network. Therefore, members compete for the right to confirm, rather than creating a block. In general, the more currency held in a member’s account, the longer the holding period, and the higher the chance that the member will sign the block and receive commissions from the block as a transaction fee. In order to maintain fairness and stability, the system requires implementation mechanisms to enable smaller currency holders to compete for the right to sign blocks. Therefore, different modifications of the algorithm limited by additional terms are common in blockchain systems.
Advantages of PoS:
● Compared with PoW, the energy consumption is lower. The verification process is completely virtualized and does not require heavy calculations.
● Prevent 51% of attacks. It is very difficult for malicious users to benefit from this approach.
● Speed up decision making. Because the main participants get extra votes, the time required to reach a consensus is shorter, making the transaction faster.
Disadvantages of PoS:
● Additional stimuli for centralization. The general principle of “the greater the amount of money, the higher the potential return” is to provide additional incentives for network members to drive monetary reserves. Although the network will be protected by 51% of attacks, it is assumed that 51% of the funds may be owned by one person, resulting in subsequent decision control. This is unlikely to occur in larger systems, and smaller networks may be exposed to this situation.
● fork threats. In the traditional Proof-of-Staking model, the most rewarding behavior of members is to create branches for repetitive capital expenditures. It is for this reason that the PoS mechanism has become more complex due to mandatory equity and other provisions to prevent unethical participants from compensating for “gap” in cybersecurity by introducing economic factors.
DPoS (delegation certificate)
Scope of application:
EOS, BitShares
The delegated Proof-of-Stake algorithm is very different from PoS. This mechanism involves selecting a certain number of validators among all network members who confirm the transaction and participate in generating blocks as planned. The certifier’s choice is based on the member’s reputation; these people have limited trust and the right to identify a range of neighborhoods while not allowing malicious users to interfere. That is to say, the validator will be re-selected every round, and the wheel speed is specific to each system. Stakeholders lost something and therefore controlled the process, thus ensuring an honest agreement. The malicious or procrastinating behavior of the delegates will be seen in the system and constitute the reason for removal from the list of certifiers during the voting process.
Advantages of DPoS:
● Network members are interested in the honesty of the transaction. The reputation system has proven to be a powerful driving force to bring the system into line with fair competition rules.
● The transaction speed is faster than PoS. Delegates can collaborate rather than compete with each other, and partial concentration can lead to faster consensus.
● No high computing performance is required. There is no need to recalculate the entire blockchain, only blocks that are received from another trusted node are verified.
● High network stability. Even if some nodes fail, the community can vote for replacement.
Disadvantages of DPoS:
● The exact degree of reliability of the algorithm remains to be found, but all attempts to crack it have not been successful.
- Wallet holders need constant motivation to keep their activities at the right level.
Other modifications to the PoS algorithm
As mentioned earlier, the traditional form of PoS is a somewhat fragile model that does not guarantee complete dispersion or system stability. In this regard, there are various possible modifications to the algorithm based on the same ownership affected by the additional terms.
Use LCoS (Leased Proof-of-Stake) on the Waves platform. The bottom line of this approach is to lease the balance to other mining nodes and obtain indirect mining revenue without calculation.
PoI (Proof of Importance) not only takes due account of the account balance of the network members, but also takes into account user activity/importance, which is measured by transactions conducted on the account. Therefore, this mechanism encourages users to be active and show it for higher rewards. PoI is used in the NEM platform.
PoC (capacity proof)
Scope of application:
Burstcoin
Whenever this method is used, its primary focus is on hard disk space rather than computing performance: the harder the hard disk space, the greater the chance that the miner will find the hash needed to construct a new block. The algorithm addresses two issues, namely high energy consumption (in the case of PoW) and the fact that miners find it more valuable to keep money instead of using it (PoS). The algorithm consists of two steps — drawing and mining. Drawing requires a list of all possible values for the block hash to be created on the hard drive, split into pairs. Mining means searching for values that are suitable for creating new blocks on the list. In other words, miners receive rewards if they meet the deadline, which is also calculated during the mining process.
Advantages of PoC:
● The algorithm can run without special equipment. In theory, even a mobile device running Android OS can become a node. Mining data is easy to delete, and users can use the hard disk to complete other tasks.
Disadvantages of PoC:
● This method is not very popular. However, it is possible to implement the algorithm in a smaller private network.
● There is a risk of using the hard disk space to mine malware without the user’s knowledge. The system itself will not be able to oppose this approach and will need to implement a separate technology to eliminate this interference.
PoAuthority
Only a consensus was reached due to the operation of the verifier. This algorithm has much in common with PoI and PoS. However, there are significant differences: If a user is specifically authorized by a US regulatory agency (the algorithm is designed by a US professional), the user can qualify as a verifier. Users can rest assured that the verifier is reputable and trustworthy, but the network concentration is very high.
Advantages of PoAuthority:
● Network reliability is responsible for making decisions and blocking malicious users as a fairly specific user range.
● No mining is required, which reduces network maintenance costs.
● Because the speed of reaching consensus is very fast, the transaction speed is fast.
Disadvantages of PoAuthority:
● Highly concentrated. Therefore, it is reasonable to use this method only in a private network.
● The algorithm is not yet popular.
PoB (burning certificate)
Scope of application:
Slimcoin
The method is built around “burning” coins. Most importantly, in order to fetch a new block, the user needs to send the coin to an address (“burn” address) without having to forward it to another location. The greater the number of coins burned by the user, the greater the chance that the user will mine the bonus for this charred coin. This mechanism usually pays off at the stage of switching between currencies, ie, the user already has something to burn.
The disadvantage of this approach is that the user holding a higher cyber bet makes a decision again.
BFT
Scope of application:
Ripple, Stellar, Hyperledger, Dispatch
The Byzantine fault-tolerant algorithm is built on a fairly complex concept and can be briefly described as follows: The state of the network is controlled by the verifier/generator who can exchange messages, thereby preventing malicious behavior and choosing the correct transaction version. From a mathematical point of view, the algorithm requires the honesty of most verifiers; therefore, even if certain network members are fraudsters, their decisions are ignored, so that they cannot influence the decision-making process. Just like PoS, the algorithm has some modifications. For example, Ripple and Stellar use the Federal Byzantine Agreement (FBA), in which each verifier is responsible for its own message chain. In addition, in Ripple, it is generally pre-selected from the total number of users.
Advantages of BFT:
● high network throughput;
● transaction costs are relatively low;
● network scalability;
Disadvantages of BFT:
● A certain degree of centralization due to the authority to delegate decisions.
dBFT
Scope of application:
NEO
Delegated Byzantine Fault Tolerance is a separate modification of the BFT algorithm in the traditional version. It relies on the same messaging mechanism and message chain verification principles. However, in this case, not all network members are eligible to be verifiers: the general must meet special requirements: the availability of special equipment, dedicated connections and a certain number of GAS. This system protects scammers and leaders from computing problems.
Advantages of dBFT:
● Better network scalability
Disadvantages of dBFT:
● Higher concentration.
DAG (Directed Acyclic Graph)
Scope of application:
Iota, Hashgraph
Directed Acyclic Graph is a method of processing transactions asynchronously. It does not depend on the blockchain structure. For example, transaction verification does not require the entire block to be calculated. The first two transactions were confirmed for each new transaction. To ensure the integrity of the transaction, Iota uses the Tangle algorithm to perform a double check on a special centralized node (coordinator). Therefore, this mechanism is hardly called 100% suitable for decentralized networks.
Advantages of DAG:
● Asynchronous processing brings extremely high transaction confirmation speed;
● Free.
Disadvantages of DAG:
The system does not apply to decentralized networks because it relies on centralized nodes for authentication.
● vulnerable to Sybil attacks.
CREDITS network consensus algorithm
To ensure the accuracy of the decision, the CREDITS network uses a combination of two algorithms, DPoS and BFT. DPoS distinguishes between voters and verifiers. The Byzantine Fault Tolerance Algorithm, or BFT for short, means protecting voting from malicious activity. The process of reaching consensus in the CREDITS network is divided into several phases. The key phases include the selection of the head node and the trusted node, the voting of the selected node on the transaction, and the protection of the bad user’s ledger record.
The comprehensive multi-stage selection of the head node and the trusted node ensures the reliability of the validator, while the multi-stage system with multiple rounds of transaction pool verification involves continuous message exchange between the validators, speeding up transaction processing and preventing invalidation. Transaction. experience.
Advantages of the CREDITS algorithm:
● High level of credibility of the verifier, thereby improving the reliability of decision making;
● high network throughput;
● resisting attacks;
● Low transaction costs.
In conclusion
We have already discussed a series of algorithms, each with its own advantages and disadvantages. Some of these systems are difficult to adapt to the main blockchain network, while others are vulnerable to attack when used in smaller private networks. Many people face the problem of low transaction speed, high cost or vulnerability.
CREDITS follows the best approach to selecting consensus algorithm combinations because existing mechanisms do not ensure the availability of critical network performance metrics such as network speed, fault tolerance, reliability, and multitasking. Decisions require multiple phases of thorough selection and verification of trusted and head nodes, round-based voting systems, complex transaction verification, and fail-safe data systems recorded on ledgers. These solutions enable algorithms to provide the right level of network reliability, accurate decision making, and prevention of errors and abuse. An internal consensus mechanism based on a combination of DPoS and BFT is more efficient than relying on any given off-the-shelf solution or any of the above methods used alone.
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