Blockchain provides immutability, transparency, and security due to its decentralized nature. The question remains, who oversees this network and verifies every transaction, given that there is no centralized authority?
So, here, in this article, we will be talking about Blockchain consensus algorithms, the core of Blockchain development.
What is the Blockchain Consensus Algorithm?
Blockchain consensus algorithm can be defined as a process of reaching a consensus among all peers of a distributed ledger system about the true state of the ledger.
Blockchain technology uses a consensus mechanism to achieve reliability for the network and build a level of trust between nodes while safeguarding the environment. And due to this, it’s essential to every Blockchain app development guide and every dApp project within the distributed ledger world. Besides, blockchain consensus algorithms also facilitate custom cryptocurrency creation.
What necessities must be fulfilled for a consensus algorithm?
Consensus protocols have formal requirements, as stated below.
- Unified agreement: All correct processes must agree on the same value.
- Weak validity: A correct process can only be valid if its output is an input to another correct process.
If you fail to choose the right consensus, it will result in blockchain forks, poor performance, and consensus failure.
Popular Consensus Algorithms
There are several different objectives based on which these algorithms operate. A few of them have been discussed below.
Proof of Authority (PoA)
In a PoA consensus algorithm, identities in a network are valued, not resources, and validators stake their own trustworthiness and reputation instead of resources.
Proof of Identity (PoI)
It’s very similar to the concept of “authorized identity.” Every transaction includes a cryptographic confirmation of the user’s private key, which is attached to the transaction.
Proof of Work (PoW)
The Proof of Work (PoW) process involves creating a cryptographic hash. Cynthia Dwork and Moni Naor first introduced the concept in 1993, and Satoshi Nakamoto introduced it again in the Bitcoin whitepaper in 2008. PoW has influenced healthcare, finance, management, governance, and other industries as well and prevented the Ethereum fork.
Proof of Stake (PoS)
Every PoS system implements its algorithm differently. However, Blockchain is consistently secured by a pseudo-random selection process in which a node’s allocation and the allocation of that node determine the network’s commitment.
Direct Acyclic Graph (DAG)
One of the most basic yet essential consensus models for Blockchain that is crucial to every company that develops mobile apps with Blockchain is DAG. Now that miners have been eradicated and all transactions are verified by the user, the associated fee comes to zero. The aim of this kind of consensus protocol consists of each node becoming its own ‘miner.’
Proof of Importance (PoI)
A variation of PoS, PoI, was introduced by NEM. This protocol considers the role of shareholders and validators. With a PoI consensus network, an attacker has a hard time attacking the network, and users are rewarded for contributing to the network’s security.
Proof of Elapsed Time (PoET)
As opposed to using mining hardware as in Proof of Work (PoW), PoET utilizes a randomized timer system for network participants, which is now utilized by many private blockchains, like Hyperledger Sawtooth.
Byzantine Fault Tolerance (BFT)
In Byzantine Fault Tolerance, it plays a role in dealing with Byzantine fault (also known as the Byzantine Generals Problem), in which actors in the system must agree on a strategy so that the system will not fail, but some are hard to please.
Proof of Activity (PoA)
By combining both PoW and PoS blockchain consensus models, PoA is essentially a hybrid approach. In the case of PoA, miners use special hardware and electric power in order to solve cryptographic puzzles as soon as possible, just as in PoW. It also mitigates the risks associated with cryptocurrency forks.
Proof of Burn (PoB)
In its application to energy conservation, Proof of Burn (PoB) is an alternative to PoW and PoS in that it allows miners to ‘burn’ or ‘ruin’ the cryptocurrency tokens, which gives them the privilege to write blocks according to the number of tokens they have.
Proof of Capacity (PoC)
Solution sets for any complex mathematical puzzle are stored in digital storage like Hard disks under the Proof of Capacity (PoC) mechanism.
Proof of Elapsed Time (PoET)
A PoET algorithm was developed by Intel to solve the cryptographic puzzles posed by PoW by considering the fact that a miner wins a block based on when and what frequency their mining hardware moves.
Conclusion
Overall, all these components are aiming for the same goal, namely consensus in a network with decentralized control. The approach to reaching consensus differs among these mechanisms, despite having a shared objective. While an ideal consensus may not exist yet, it’s fascinating and moving to see how consensus mechanisms are evolving and adjusting over time, especially as a protocol like these changes, and it will surely be an exciting experience to see ground-breaking ideas materialize.
To ensure that Blockchain networks can work effectively, the algorithms that determine the consensus must be wisely chosen. If a poor consensus algorithm is chosen, it will lead to Ethereum & consensus fork.
