Types of Consensus Mechanisms
Below are the different types of consensus mechanisms:
1. Proof Of Work
Proof Of Work is used by the world’s most popular cryptocurrency bitcoin.
- It requires network participants to spend time-solving an unpredictable mathematical puzzle in order to prevent the system from being hacked.
- In cryptocurrency mining proof of work is commonly employed to validate transactions and mine new tokens.
Challenges in PoW:
- The mathematical problems are so complex that they require special high-powered computers in order to solve them and those computers require a lot of energy to operate.
- Some have raised issues with the amount of energy needed claiming that such energy consumption is bad for the environment.
- Another problem although unlikely is known as a 51% attack.
- If a single mining entity obtains 51% of the bitcoins hash rate or the measure of computational power used to verify transactions it can temporarily break the rules by double spending money in blocking transactions.
2. Proof Of Stake
Proof Of Stake seeks to reduce the amount of computational power needed in order to verify transactions.
- With Proof Of stake Coin owners offer their coins as collateral for a chance to verify transactions and validate blocks.
- These coin stakes are known as validators.
- The block is then mined or validated by validators who are chosen at random rather than employing a competition-based process like proof of work.
- A coin owner must take a certain amount of coins to become a validator.
- Before a user can become a validator on Ethereum, blocks are validated by multiple validators and they are finalized and closed when a specific number of validators confirm that the block is correct.
- Proof of stake is a protocol that aims to address the environmental and scalability difficulties that plague the proof of work protocol.
- A competitive approach to transaction verification is applied when it comes to proof of work.
- As a result, people are naturally motivated to find ways to gain an advantage usually in the form of more computers which leads to more energy consumption and negative environmental impact.
- The proof of stake systems attempts to address these issues by effectively swapping staking for computational processing power.
3. Delegated Proof of Stake
Delegated proof of stake (DPOS) is a consensus mechanism that allows for the validation of blocks on a blockchain by using a more democratic process. Instead of a single node validating every block, DPOS uses a much more decentralized approach.
- In a DPOS system, there are many nodes on the network that can validate transactions and create new blocks. This means that there is no need for miners like in bitcoin or Ethereum where only one miner can create blocks at any given time. With DPOS, anyone can create new blocks so long as they have enough votes from other users in the network.
- DPOS is becoming increasingly popular because it makes it easier to scale up networks while also increasing the security and decentralization of those networks by making them harder to attack or compromise than other types of consensus mechanisms like POW (Proof-of-Work) or POS (Proof-of-Stake). For example, because there are so many possible validators in DPOS systems, it makes it much more.
4. Proof of Capacity
Proof-of-capacity (POC) concept, is also known as proof of space.
- Proof of Capacity(POC) is a consensus mechanism algorithm used in blockchains that allows the mining devices in the network to use their available hard drive space to decide the mining rights.
- Instead of using the mining devices’ computing power or the miners’ stake in the crypto coins.
- Proof of Capacity emerged as one of the many alternative solutions to the problem of high energy consumption in proof of work, the problem that inherently promotes crypto coin hoarding instead of spending in proof of stake.
5. Proof of Elapsed Time
- Proof of Elapsed Time is used by a private or permissioned Blockchain network.
- Each node is assigned a waiting period by the network in order to mine- The one with the shortest waiting period wins first.
- Proof of Elapsed Time comes from intel, and it relies on a special CPU instruction set called intel software guard extensions.
6. Proof of Authority
To help validate transactions and generate new blocks proof of authority employs a reputation-based architecture.
Validators in proof of authority consensus blockchain are typically users who have been chosen and approved by other network participants to act as system moderators. As a result, validators are usually institutional investors or other significant partners in the blockchain ecosystem that have a stake in the network’s long-term success and are prepared to reveal their names for the purpose of transparency and accountability.
- Proof of Authority blockchains requires validators to put their social capital on the line whereas proof of stake blockchains demand validators to put their financial capital on the line to ensure acceptable acts.
- However, in addition to staking their reputation with several proofs of authority, blockchains demand prospective network validators invest considerably in the network financially.
- This allows the network to weed out would-be validators with ambiguous or shady motivations while monetarily rewarding honest nodes that are prepared to commit for the long haul.
7. Proof of Activity
Proof of Activity is a protocol that combines proof of stake.
- In most proofs of activity arrangements miners compete to mine new blocks in exchange for tokens incentives.
- The blocks on the other hand do not contain transactions instead they are empty templates with the transaction title and block reward address contained in them.
- Only token holders are qualified to act as validators and the information in the transaction title is used to select a validator node at random to sign the block and confirm it to the blockchain ledger.
In conclusion, consensus mechanisms are critical to the functioning of blockchain networks. They enable decentralized networks to agree on the validity of transactions without relying on a central authority. While different consensus mechanisms have their strengths and weaknesses, they all play an essential role in enabling the decentralized, trustless nature of blockchain technology.
Cryptographic Consensus Mechanisms in Blockchain
A consensus mechanism is an algorithm that is used to achieve agreement, trust, and security across a decentralized computer network. These protocols help to make sure that all the nodes are synchronized with each other and agree on transactions, which are legitimate and are added to the blockchain.
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