Today I am discussing the blockchain consensus algorithms we’ve been hearing about for quite a long time now.
Blockchain technology is widely known for its distributed decentralized network structure that gives immutability and high security to data. This data lives in a block on the blockchain network without a central authority validating and verifying transactions that take place here.
Decentralization refers to a lack of centralized bodies like governments or financial institutions like banks, to keep track of the transactions occurring in the network. The nodes on a blockchain network are instead, distributed across several computers worldwide.
Every transaction and the data stored on a blockchain is validated and secure. However, to validate and verify these transactions, especially in a decentralized environment where no central authority overlooks these activities, it is necessary to have specified and implement a few standards and regulations.
This is where blockchain consensus algorithms enter the picture. Huge volumes of transactions are carried out every second on a blockchain network in real-time.
To verify these transactions and prevent malware attacks or thefts, like a double-spending attack, blockchain consensus algorithms play a vital role.
In this ultimate cheat sheet, I am walking you through the various types of blockchain consensus algorithms, how they work and what popular technologies use them.
But before we proceed, let me explain to you what on earth are blockchain consensus algorithms.
A Brief Note on Blockchain Consensus Algorithms
Blockchain consensus algorithms are the backbone of a blockchain network. They make it when done right, or break it if anything goes wrong!
A consensus protocol enables all the parties of the network to arrive at a consensus (a common decision) on the current state of the ledger. Moreover, it also enables these participants to trust unknown peers in the system.
In simple words, it allows parties to establish their agreements on a single data value that is shared across several systems.
Blockchain consensus protocols are a crucial element for blockchain technology. They majorly focus on facilitating the uprightness and security of the system.
There’s a long list of consensus protocols out to use by networks. However, today I am going to list a few important ones here.
Let us now take a look at the different types of blockchain consensus protocols.
The Different Types of Blockchain Consensus Protocols
Blockchain technologies, although decentralized and secure to some extent, can be vulnerable to 51% of attacks. The different types of consensus protocols help to keep these 51% attack issues at bay.
Proof of Work
The Proof of Work (PoW) consensus algorithm is known to be the first consensus algorithm used in blockchain. It was first revealed to the world by Cynthia Dwork and Moni Naor in 1993 and later re-introduced by Satoshi Nakamoto in 2008.
Transactions on a blockchain network are recorded distributed ledgers on back-to-back blocks. This disallows users to spend their assets twice. To prevent tampering of data, a copy of every transaction is stored across the publicly distributed ledger. Whenever there’s an alteration it is rejected by all computers on the network.
Tampering is detected with the help of cryptographic hashes that are long strings of numbers. A single string of hash is generated for a given data set. Any tiny change will change in the entire hash code which is totally unrecognizable.
A hash is a one-way function which means it is indeterministic. It cannot be used to generate the underlying original data.
Popular blockchains that use this algorithm: Bitcoin, Litecoin, Monero
Proof of Stake
The Proof of Stake (PoS) algorithm emerged as an alternative to PoW. Although both algorithms have similar objectives, they possess several differences at the same time. The PoS protocol greatly differs when it comes to validating new blocks.
In this algorithm, the blocks are validated based on the stake of the parties and not by executing hash functions. Validators in this protocol, stake assets in the form of digital tokens or currencies. These validators are then, selected randomly based on the amount of computational power that is allocated.
Popular blockchains that use this algorithm: Ethereum, Cardano, Polkadot
Proof of Authority
Proof of Authority (PoA) is a consensus protocol is a type that is built based on the reputation of trusted participants in the network. It was first founded in 2017 by Gavin Wood, co-founder and former CTO of Ethereum. The PoA consensus protocol works efficiently for private blockchain networks.
This consensus algorithm greatly relies on the values or reputations of individuals within a network and across the system block.
In this algorithm, validators stake their own identities instead of digital tokens or currencies. These networks are secured and new blocks to the chain are validated by trustworthy nodes.
Popular blockchains that use this algorithm: JPMCoin
Read More: Wonderful Blockchain Platforms to Build dApps in 2021
Proof of Elapsed Time
The proof of Elapsed Time (PoET) consensus protocol was chiefly developed to solve the problem of “random leader election” of computing. It was developed by Intel. It was launched as part of the Software Guard Extensions (SGX) reference manual in programming.
In this system, each node or participant must wait for a randomly chosen period of time. The node whose timer is complete wins the new block and is allowed to validate it.
This consensus algorithm is being used mainly by private blockchain networks.
Popular blockchains that use this algorithm: Hyperledger Sawtooth
Proof of Space
Proof of Space, also known as PoSpace and not PoS, is quite similar to the Proof of Work (PoW) consensus protocol. The PoSpace consensus protocol makes use of disk storage to validate new blocks and transactions.
PoSpace consensus algorithm works based on disk space consumption. Moreover, this system incentivizes miners with the most considerable disk space allocated to a block.
Popular blockchains that use this algorithm: Burstcoin, SpaceMint
Proof of Importance
Lastly, we have the Proof of Importance (PoI) blockchain consensus algorithm, introduced by NEM. The idea behind this protocol is much similar to that of the Proof of Stake (PoS) consensus algorithm.
The PoI system largely depends on a harvesting mechanism. It determines whether or not a node is eligible to be added to the network. The more someone harvests on a node, the higher the chances for it to be added to the blockchain. To be eligible to harvest one must have at least 10,000 XEM in their NEM account. Harvesting is rewarded in terms of the transaction fees the validator collects as his/her reward.
Popular blockchains that use this algorithm: Unknown
Conclusion
In this ultimate cheat sheet, I am walking you through the various types of blockchain consensus algorithms, how they work and what popular technologies use them.
Stay tuned for PART 2 of this post!
