PoW, PoS, dPoS — Navigating the World of Consensus Mechanisms
Consensus mechanisms are the central foundation of public blockchains. Part of the process for ensuring blockchains remain a transparent and reliable ledger of past transactions is ensuring that new blocks reach what is known as ‘consensus’. Reaching consensus ensures that each node on the network — participants who have a full record of that blockchain’s history — are synchronized with each other.
Since the original implementation of the proof of work (PoW) consensus mechanism with the Bitcoin protocol, there have been numerous types of consensus mechanisms developed and deployed in other blockchains. Navigating each of these definitions is difficult, and there are new methods of consensus being developed regularly. Here, we’re going to explore some of the most common methods of blockchain consensus and what they mean for their respective protocols.
Proof of Work
Proof of work was initially implemented as part of the first-ever functioning blockchain protocol, Bitcoin, in 2008 — though its origins are older than that. First concretely described in a whitepaper by professional cryptographers Ari Juels and Markus Jakobsson, PoW is a way of confirming that network participants expended a certain level of computational effort in a given length of time.
Proof of work consensus mechanisms use a hash function, which allows each full node on the network to announce their conclusion about a block’s validity to the wider network. This can then be cross-verified by other network participants. The hash function is essential in a PoW system, as if it contains false or unacceptable information it will not be validated to the network and instead will be rejected from the final version of the block.
Simply put, PoW consensus mechanisms require the physical expenditure of computational power. This is essential in order to reach a solution to the cryptographic problem which enables validation of new blocks on the network, and the process of participating in PoW consensus is known as mining. Usually, the miner — the participant who first verified the block was acceptable — is rewarded for the computational effort they have expended in the form of the coin or token of the protocol, as is the case with Bitcoin.
Providing incentives for miners is integral to keeping the system running, but it has also contributed to the rise of mining consortiums which control an unacceptable portion of the hashing power — leading some protocols to deploy other methods of consensus.
Proof of Stake
Developed alongside second-generation blockchains, proof of stake (PoS) is a consensus mechanism based not on physical mining, but rather by selecting block validators according to how many tokens participants hold.
Instead of the hash function in PoW based consensus mechanisms, PoS provides individual ‘stakeholders’ with a digital signature that verifies their ownership of a stake in the protocol. When the time comes to validate new blocks, the network will randomly select an individual node to validate the information. The higher the number of tokens an individual holds, the more likely they are to be selected to validate the next block.
When a validator approves a new block, they receive a block reward just as in PoW systems. This ensures that it is worthwhile for individuals to participate in the network and stake their tokens in order to be in with a chance to be selected to validate a block. As minimal physical expenditure of computational or hashing power is required, this process is often referred to as ‘minting’ blocks, rather than ‘mining’ in PoW protocols.
At present, there have been few functional implementations of true PoS consensus protocols. Ethereum is one of the highest-profile blockchains to transition to a PoS based system, with the launch of their Casper PoS algorithm expected to replace PoW mining. Still, in its infancy, the development of Casper took a long time though it promises a huge increase in network scalability.
Delegated Proof of Stake
Some blockchain researchers recognize that there are issues with a pure PoS consensus method — the most pressing of which being participation. For example, say a blockchain has a high number of individual holders, or addresses, each with a nominal value of protocol tokens. In this case, unless voting participation was unusually high, it would be difficult to attain a fully representative vote — as it’s likely that many blockchain participants won’t take an active role in voting or validation on the network.
Instead, delegated proof-of-stake or dPoS systems share many of the same principles of PoS consensus, with the added ability for participants to ‘delegate’ their stake to a trusted pool or entity, who can then stake it on their behalf. A great example of this would be an individual who has the necessary hardware to run a staking pool 24/7 with guaranteed uptime, so they will have a higher likelihood to be chosen to validate any given block. In this case, participants could delegate their stake to this pool and every time it is chosen to validate a new block, they would each receive block rewards proportional to their stake in that pool.
Arguably, dPoS is a superior consensus mechanism to PoS in some ways because it recognizes that not every participant has the necessary technical knowledge, computing hardware or time to participate directly in protocol consensus. As it is advantageous to have a maximum number of network participants, dPoS allows these individuals to still take part in consensus. Although this makes the network more centralized in theory, there is no requirement to remain in a staking pool indefinitely.
Metaverse’s Consensus Solution
The Metaverse approach to consensus is one of the most novel ways yet. By using a Dualchain Network Architecture, or ‘DNA’, Metaverse seeks to optimize both scalability and decentralization by using different consensus mechanisms in parallel. The DNA BaseChain, which is the Metaverse ETP mainnet, utilizes a hybrid PoW and PoS consensus mechanism while the DNA chain will use a variation of dPoS to achieve consensus.
Essentially, this splits Metaverse’s consensus into two stages, first by using proof of work, and then by switching to a delegated proof of stake or pure PoS consensus mechanism on an ad-hoc basis. Metaverse will use PoS based consensus when the PoW consensus reaches the upper bounds of its transaction limits. For example, if transactions on the Metaverse network approach the limits of mining capabilities, there’s the possibility of switching to the second phase and utilizing DPoS.
To avoid the challenges and pitfalls of both DPoS and PoS as we’ve touched upon above, Metaverse introduces the concepts of ‘Token-Height’ and ‘HeartBeat’. Token-Height weights votes in a DPoS system to avoid interference by financial manipulation. For example, if would-be attackers attempted to hijack the system by suddenly acquiring large amounts of tokens, their Token-Height would still be low, and as a result they would have little voting power.
Similarly, inactive users attempting to gain passive dividends from consensus without contributing to the system will be deterred, as all staking participants will have to send a ‘HeartBeat’ to the system to show they are still active. This motivates holders to ensure their delegates are consistently acting in their best interests.
This hybrid approach allows the Metaverse network to leverage the power of several consensus mechanisms to ensure optimal network participation, and as a result, maintain the highest levels of transparency and blockchain validation. Likewise, by using multiple consensus mechanisms, it is far more difficult for attackers to launch a network attack and seize control of the blockchain.
Metaverse is one of the first networks to adopt a hybrid and flexible approach to consensus, and their Dualchain Network Architecture is what makes this synergy of consensus mechanisms possible.
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Built on three core blockchain pillars: Security, Scalability, and Interoperability; The Dualchain Network Architecture (DNA) by Metaverse.
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