How to reach consensus in decentralized systems?

Maksim Akulshin, CTO eCoinomic.net

What is consensus and for what it in general is necessary in a blockchain? As this technology means decentralization, it is logical that there is no single uniform control center which is responsible for making decisions. It is a big plus on the one hand as excludes a possibility of corruption, but with another, all participants of system have to come to the uniform agreement, consensus without which the blockchain won’t be able to function.

Therefore, a consensus can be defined as the decision that is taken by a group of persons in the interest of the whole is the achievement of solidarity by a certain community. Consensus, like in democracy, takes into account the opinion of the majority, not of the minority, but its goal is to maintain the stable operation of the entire system. And, all voices are equivalent and what them will be more, the decision will be more objectively as a result.

Proof of Work (PoW)

Used in: Bitcoin, Ethereum, Litecoin, Monero, ZCash, Dogecoin.

Miners solve cryptographic problems, calculating (mining) the next block, which will be added then to the blockchain. It demands big computing capacities, power expenses and everything is arranged in such a way that process constantly becomes complicated. As soon as the new block is found, it goes to network for verification. Then follows a simple process of block checking on identity.

This is a relatively effective type of consensus, but its main drawback is large energy consumption. Also, people and the companies which possess faster and powerful computers (ASIC) have more chances to find solutions and new blocks.

Proof of Stake (PoS)

Used in: VCash, BitBay, Peercoin, Qtum, Stratis.

This kind of consensus makes the entire mining process virtual and replaces the miners with special people, validators, that influence on decision-making. In PoS validators block some of their coins as bets. After that they begin check of blocks and as soon as there is a block which meets chain conditions they stake on it, thereby confirming the choice. If the block is added, then the validators are rewarded in proportion to their rates. Advantages of this consensus before the same PoW consists in smaller energy consumption, it is possible to work from any device online, but its minus — a large number of time-blocked funds, which makes mining more elitist.

Proof of Stake Time (PoST)

Used in: Vericoin.

This consensus works with the age of the coin, but instead of taking the number of coins to determine the age, fixes amount of time during which these coins have been exposed as a rate on the concrete address.

Delegated Proof Of Stake (DPOS)

Used in: Steemit, EOS, BitShares.

This is Daniel Larimer’s creation which substantially differs from the classical proof of a stake. In this version of consensus, the tokens do not vote for the blocks, but they can be used to select delegates who, in turn, check the blocks on their behalf. Delegates are regularly re-elected, their number varies from 21 to 100. In DPOS, unlike PoW and PoS, miners are not competitors and can cooperate to find new blocks.

BTF algorithm

Used in: Hyperledger, Stellar, Dispatch, Ripple.

This algorithm is one of the first practical solution for Byzantine Fault Tolerance problem(PBFT). It is centralized, but it provides a high throughput rate of transactions.

Proof of Activity (PoA)

Used in: Ethereum, Kovan.

In it, transactions are checked by pre-approved accounts, which are a sort of system administrators. From them, other nodes learn about the condition of the system. To advantages of the proof of activity it is possible to carry high speed, to minuses, a decentralized nature, which makes it practically not applicable to public networks.

Proof of Weight

Used in: Algorand, Filecoin, Chia.

Represents the whole group of consensuses. If in the PoS your percentage of tokens that belong to the network gives the probability of calculating the block, then another weighted value is used, for example, how many IPFX data you store.

Proof of Capacity и Proof of Storage

The first version of the consensus realizes the concept “megabytes as resources”. People are rewarded for sharing their place on the hard drive.

The second one is very similar to the first, but megabytes are used in the cloud storage. Such a concept, for example, is implemented in SIA project.

Proof of Checkpoint (PoC)

This is a hybrid version of PoS and PoW combination. If the block is confirmed in one algorithm, then it needs to find an analog in the other. The meaning of this type of consensus is to mitigate attacks on the proof of stake.

Proof of Meritocracy

Consensus within DAO

It is used in Swissborg project, which implements the idea of machine management for financial assets. People who are members of the DAO — a decentralized autonomous community and own tokens of the company vote for the further development of the project. Voting questions can be completely different: from choosing a contractor to, for example, in ABYSS project, the possibility of changing ineffective top management.

In total:

Given the undying interest to blockchain technology, the development of new and finalization of previous consensuses is in continuous mode. As a rule, the choice of consensus is based on the architecture and specificity of the project. Although, undoubtedly, the leaders in a technological stack are: proof of work, proof of stake and proof of activity. It may be directly related to the fact, that they were one of the first and the products which are already working on blockchain technology have successful application experience with this types of consensuses.

One of the main problems of reaching consensus is the lack of using above solutions during a long time. The blockchain just gains steam and begins to turn from a stage of a word, fantastic, little-known outside the professional circles, into a practical technology of tomorrow. The products using the decentralized solutions for the present in the majority are in a stage of MVP (Minimum Viable Products) or prototypes, that is why consensuses «break in» is a matter of time and then we can probably talk about the official classification and segmentation for certain business spheres and related to the products.

There is no doubt that further steps in finalizing the main types of consensuses, and also synergy searching among the already existing as, for example, Proof of Checkpoint, will not take long, as well as the development of fundamentally new solutions that are not similar to previous ones, which can become trendsetters of the market, as their predecessors in due time.