2018 could be the year of non-leader-based consensus mechanisms

Tal Dadia
Coinmonks
4 min readApr 30, 2018

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While delegated proof-of-stake is gaining spread over the industry, non-leader-based consensus could potentially solve massive issues in the field and give a decent fight.

The blockchain industry has offered several mechanisms to achieve consensus. Proof-of-work was the first one to be introduced by Bitcoin’s Satoshi Nakamoto. In the payments realm, it is quite clear there is a counterproductive incentive structure between the need to compensate those who build the blocks (miners, stakeholders etc.), and the need for users willing to transact information in systems with inherently low scalability. Adding the electricity waste and the monopolies on mining control, one can comprehend the growth in the use of proof-of-stake mechanisms.

The downside in consensus mechanisms relying on economic capability is that they can be controlled by the few. For instance, the economy-based consensus splits the population into individuals with extra coins and participants without coins. Furthermore, economic mechanisms don’t really reflect the partaker’s stake. As an example, what happens when two people stake the same amount, but for the first, it’s a 70% worth of stake and for only 10% for the second participant? Such system doesn’t really create staking scale which should reflect the level of trust in the system.

The current innovation in the field is the proof-of-authority algorithm, which tries to solve this very issue by staking not only the balance but participant’s reputation as well. Such method creates a system of private forked blockchains of permissioned identities to create the blocks. In order to continue to be trusted by the network and create the blocks, the participants put their reputation at stake.

Regardless of model classification (proof-of-work or any kind of proof-of-stake), consensus types related to computational work and economic proofs have mainly relied on network leaders. In some extent, the creation of off-chain transactions can sometimes be seen as a peer-to-peer understanding of mutual data flow creation and by that as a non-leader formation of trust, yet the finalized data will also be achieved by leaders when reaching into the blockchain’s ledger.

Why the buzz on Hashgraph?

One of the most interesting projects which recently announced its public blockchain is Hedera Hashgraph. Probably, the most interesting part of it is that it claims to offer a fully decentralized network of nodes, which have no leader at all. All nodes come to an agreement on a certain matter by using two protocols — gossip about gossip, and virtual voting. In short, gossip about gossip lets all network participants know what everybody else knows, so at an exponential rate, everyone is aware of all data in the network. This allows for a case when a node crashes; it can immediately restore all data by just connecting again to the network. The second protocol — virtual voting — allows for an efficient consensus reaching — because everyone knows what everyone knows, there is no need to send, collect and decide on a voting result, but rather each participant can decide the consensus because it knows what others will vote.

From Hedera Hashgraph whitepaper

Hedera Hashgraph announced their public ledger, and a token to come in soon. This could potentially be a revolutionary change in the industry which is still open to new types of consensus methodologies. It is still unclear whether Hedera Hashgraph will be able to deliver its promises, in terms of transaction-per-second throughput and fairness in large amounts of nodes over the net. However, the company does seem serious in its SDK demos and the ease of developing on top of it. Yet, Hashgraph is relevant in cases where common truth is needed between all parties at all time. Public auctions and the exact selling price of stocks are a few use-cases in this matter, but a question arises whether Hashgraph or any other form of non-leader consensus could be relevant for payments system. In cases of disputes between different parties who previously interacted in crypto exchanging, it is crucial to include several leaders to achieve a coherent truth about which side is right. This, of course, relates to the regulation compliant payments solutions out there, and please leave aside those with the need for anonymous use.

This is why COTI has developed a Mediation layer just for that. COTI recognized the need for human touch in these types of cases where merchants or consumers just don’t act accordingly and fail to transact their good. Therefore, combining the use of proof-of-stake into the world of dispute resolution made by men, COTI achieves an ability which is currently absent in the crypto world. Using the wisdom of the crowd techniques, COTI wants to take the arbitration process currently done by Visa and MasterCard and to make it much more efficient. In the end, this will shorten the arbitration times of disputes and by that, benefit with both the buyers and merchants.

COTI’s Mediation Process

To conclude this, it would be interesting to see whether Hashgraph will penetrate the market and pose some threat to Ethereum’s platform, or will the non-leaders use cases won’t grow high beyond public auctions and stock prices consensus. Moreover, it would be fascinating to see how would the use of non-leaders consensus be implemented in payment systems, as a line of trusted members seems, at least for now, pretty much inevitable.

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Tal Dadia
Coinmonks

Working on a new adventure | Former VP Product, Blockchain @ JPMorgan Chase