Comprehensive Review of Proof of Stake Consensus in Blockchain
One of the vital elements of a blockchain system is the consensus algorithms, as they play a crucial role in blockchain security and performance as well. PoW (Proof of Work) consensus algorithm from Bitcoin is adopted by Ethereum. But, PoW has deficiencies.
Thus, the Ethereum community is looking forward to the PoS (Proof of Stake) algorithm, which has the potential to overpower PoW. In this article, we are going to cover everything you need to know about Proof of Stake consensus in blockchain technology.
Proof of Stake:
In the PoW consensus, the miners solve cryptographic puzzles and are rewarded for it. Whereas, in PoS consensus, a group of selected validators proposes new blocks. Based on the stake, and in a deterministic way, a validator is chosen. Anyone can deposit their coins as a stake to be a validator. The chance to participate will depend on the number of stakes they input.
A set of validators, sometimes also known as forgers or creators, are tracked down by the blockchain in Ethereum & consensus fork. Whenever it is required to make new blocks, the blockchain chooses a validator randomly. The validator who is selected substantiates the transactions and then proposes a new block for all the other validators to agree upon.
Next, all the current validators vote for the new blocks. The voting power depends on the validator’s stake. If anyone proposes invalid blocks, or votes, or transactions maliciously, it compromises the chain’s integrity, and they may lose their stakes.
When a block creator accepts new blocks, then the creator can collect the fee of the transaction as a reward for making new blocks.
Compared to the mechanism of PoW, PoS is more environment friendly, energy-efficient, and is more secure as well. Just like PoW, it does not allow total decentralization. The primary reason behind this is the wealthy nodes, who can monopolize the network’s stakes. The more the stakes, the more effective control you have.
In a blockchain, whenever two competing blocks are added, a temporary fork takes place in consensus forking. The newer blocks are attached to the biggest chain. The blocks that are added to the shortleaf will be discarded. And those transactions will return to the transaction pool and will be again picked up for processing.
Ultimately, all the conforming blocks will be compromised by the blockchain by making use of the cryptographic hashes pointing.
Similar to software development, in blockchain, forking is known as a common practice. Whenever a blockchain bifurcates into two separate paths, forking occurs. Some of the events that can trigger a blockchain fork are given below:
- Software or hacking
- While competing for blocks with the same block, a temporary forking can take place.
- When new features are added, it makes a change in the protocol of blockchain, like mining algorithm, block size, and rules of the consensus.
Based on the nature of such events, the issues need to be fixed by a hard fork or soft fork. But, in the case of temporary blockchain forks, there is nothing to do and wait till the network heals itself.
When radical changes are introduced in the protocol of the blockchain, new rules or protocols are non-conformant to the historical blocks in a custom cryptocurrency creation.
The operators and developers agree with changes made in the protocol and upgrades to new software. The blocks that will follow the old protocol will be rejected, and the blocks that follow the new protocol will be the biggest chain moving further.
In a contentious hard fork case, as long as the miners are there to maintain the new and old software, the blocks that are created by the new and old software will diverge into different blockchains. And during a contentious hard fork, to fuel the new blockchain, a new cryptocurrency will be developed.
In the case of soft cryptocurrency forks, the new software considers the existing historical blocks as valid blocks. The old blocks still consider the new blocks made through new software as valid ones.
In the decentralized network, the nodes that stay with the blockchain software’s older version continue making new blocks via the older software itself. The nodes that are upgraded to the blockchain software’s newer version will make new blocks by making use of the new software.
Ultimately, when the hashing capacity of the majority of the network upgrades to the software’s newer version. Although the nodes having older software can continue creating new blocks, as it is not the largest chain, the new chain will overtake these blocks.
We are standing in the era of development surrounded by technologies. And crypto-assets, cryptocurrency, blockchain, bitcoin, and Ethereum fork are no longer unfamiliar. Investing in blockchain can be beneficial, especially when someone wants to generate profit at a huge margin. It looks like the foreseeable future is great in blockchain technology.