Blockchain

List of Top 10 Different Types of Consensus Algorithms.

We all know that with the help of blockchain cryptos achieve a high rate of transparency, security and immutability but do you know how blockchain have these.

The reason behind blockchains unique characteristic is the consensus algorithm.

In the blockchain, a consensus is like an agreement where all members of the blockchain network should accept the majority decision even though they liked it or not. This majority decision must be beneficial for every person in that network.

In a crypto space, there is a tone of consensus algorithms exists which make every cryptocurrency unique.

In this post, I briefly covered the top 10 unique consensus mechanisms.

1. Proof of Work (PoW).

Used by: Bitcoin, Bitcoin Cash, Litecoin, Dogecoin etc.

First on the list is Proof Of Work, it is first on the list because it is the first consensus algorithm started the tale of consensus.

PoW is firstly used by Bitcoin to create new coins and record transactions by tackling the double-spending problem.

Although, PoW is not a new idea, the way Satoshi (creator of Bitcoin) combined this and other existing concepts  of  cryptographic signatures, Merkle chains, and P2P networks ,  into a viable distributed consensus system.

PoW uses miners to create new coins and add new transactions to the blocks using their computational power and nodes to validate the block.

Miners computational power used to create a nonce (a random number) which then can create a valid hash value that set by PoW in the given time frame.

The PoW system is not as simple to understand in two or three lines, that’s why I recommend you to read my previous post about Proof Of Work Simply Explained.

Pros.

Successfully tackles Double-Spending problem.

It has been tested in the wild since 2009 and stands steady today as well.

Cons.

Uses computational power which needs more electricity and produces heat.

Prone to a 51% attack.

2. Proof of Stake (PoS).

Used by: Ethereum(soon), Peercoin, Nxt.

Proof of Stake formed to tackle the problem in PoW.

As a name indicate the entire mining process here based on the stake of the participant.

Like in PoW to become a miner you have to have the powerful hardware components but in PoS system you need to deposit a certain amount of coins into the wallet, means if you have 10% of the stake, then your probability of mining next block will be 10%.

However, the process of choosing a miner is completely random in the POS system.

If you want to read a full detailed explanation of the PoS system, you can read my post on Proof Of Stake before reading it’s pros and cons.

Pros.

Doesn’t need any powerful hardware to become a miner.

Not easy to conduct the 51% attack.

Cons.

Nothing-at-stake problem means during a fork (blockchain splitting) block generators can vote for multiple blockchains.

3. Delegated Proof of Stake (DPoS).

Used by: Steemit, BitShares, EOS, Lisk, Ark.

Delegated Proof of Stake is work as PoS consensus, but one difference is instead of stakeholders directly participating in mining process here they delegate their stake to another called witness.

These witnesses are then responsible for mining a block, and they get the reward for it, but the reward fixed by the stakeholder.

In DPoS mining process occur in a round-robin fashion.

For example, in Steemit only 21 witnesses selected to mine a block at once and other kept at standby so that if someone of the witness nodes dies or does some malicious activity, then it could be replaced by a new node immediately.

Pros.

Fast.

Energy Efficient.

Cons.

A bit centralized.

4. Leased Proof of Stake (LPoS).

Used by: Wave platform.

This is another version of the PoS mechanism that aims to give the preferences to small stakeholders get involved in mining.

Usually, in PoS system a stakeholder who have the big holding has the higher probability of mining the blocks, but LPoS aims to give preference to the small stakeholders by letting them lease the big node to win the block.

In LPoS system you can get mining opportunity even if you don’t have a large amount of coin to deposit as a stake. The system allows you to lease a complete node along with the other small stakeholders and earn the reward with a percentage of the transaction fee that has collected by the complete node.

Pros.

Encouraging small stakeholders to participate in the network.

Cons.

Somehow leads to centralization by giving high priority to small stakeholders.

5. Proof of Weight (PoWeigth).

Used by: Algorand.

This consensus aims to make a further up-gradation in the PoS system by adding some other factors than owning more tokens.

These factors get identified as “Weighted Factors.” For example, Filecoin considers the amount of IPFS data that you have and weights that factor. Some of the other factors including but not limited to Proof of Space.

Pros.

Energy efficient.

Highly customizable.

Cons.

Incentivization can be a challenge.

6. Proof of Burn (PoB).

Used by: Slimcoin, TGCoin (Third Generation Coin).

In this consensus mechanism to become a miner, you have to burn some of your holdings.

Burn means you have to send some of your holdings to a public address having no private keys and randomly generated by the system, after sending you can’t get back the holdings you have sent to the address.

This way system decides who will be the miner to mine next block based on the value they have burnt which means, if user burns more coin they’ll have the greater chance to mine the next block and further increasing their overall rewards.

There are different ways to implement the PoB mechanism. In some case, an existing PoW coin can burn in exchange with the PoB coin.

Pros.

Creates stability by appreciating users to hold the coin for the long term.

Enhances the decentralization and creates a better-distributed network.

Cons.

Users holdings gone forever means wasting it.

7. Proof of Elapsed Time (PoET).

Used by: HyperLedger Sawtooth.

In this Consensus, you have to wait for a certain time to mine block and time based on the principle of a fair lottery system where every single node is equally likely to be a winner.

PoET mechanism mainly used by the permission blockchain network where you have to get permission to participate in the network.

In this algorithm, a winning node is network generates a random wait time and goes to sleep for that specified duration, and next node wakes up and waits for the time that created by the previous node and passes the time mine the block. The same process then repeats for the discovery of the next block.

Remember, PoET is suitable for a big corporation which have certain software to ensure randomly selecting the waiting time for all participating nodes and genuine completion of waiting time by the winning participant fulfilled.

Pros.

Low cost of participation.

Encouraging more participation.

Cons.

Not suitable for public blockchain networks.

Even the cost of participation is low, but participants have to use their hardware to mine a block.

8. Proof Of Capacity (PoC) aka Proof Of Space (PoSpace).

Used by: Brustcoin, SpaceMint, Chia.

PoC works like a PoW mechanism, but the only difference is instead of using computational power to calculate nonce in this mechanism miners use their hard drive memory.

In this mechanism, if you want to mine a block, you have to plot your hard drive. When you plot, the system uses your hard drive space to create nonce.

Here, nonce means a data which have the different scoops, the scoops are nothing but having different hash combinations in it, these hash continuously created by you, including your particular ID until you have solved the nonce.

The resulting scoop number and the corresponding nonce will be used to calculate a unit of time called the “deadline”.

If the deadline that you’re able to produce is shorter than those of the other miners then, you are allowed to create the new block, and you will be entitled to the block reward.

Pros.

Environmental friendly.

Can be used for anti-spam measures and denial of service attack prevention.

Cons.

Incentivization can be an issue.

9. Byzantine Fault Tolerance.

In this list, it is the first consensus that not contain the word Proof 😊.

Anyway, form the above consensus list we have seen every participant on the blockchain network must have to agree upon the rules set by the consensus algorithm to get an incentive or other benifits.

What if some participant on the network acts malicious and hole network unaware about the act.

This is the fundamental question of the Byzantine General Problem, which gave birth to the concept of Byzantine Fault Tolerance.

Then, what is the Byzantine General Problem?

Byzantine General Problem conceived in 1982 as a logical dilemma that illustrates how a group of generals may have a communication problem when trying to agree on the next move.

Below is the video that helps you understand what is Byzantine General Problem actually is.

In crypto space, there are several ways we can tackle this Byzantine Fault Tolerance.

#1 Practical Byzantine Fault Tolerance (PBFT).

The goal of PBFT is to correctly reach a sufficient consensus despite malicious nodes in the system failing or sending out incorrect information.

In this system, all the nodes receive the order from one leader node. All nodes (here called as backup nodes) in the system communicate with one another with the goal being that all honest nodes will come to an agreement of the state of the system using a majority rule.

There are two functions nodes can communicate: nodes must prove that messages came from a specific leader node, and they must verify that the message was not modified during transmission.

For the PBFT system to function, the number of malicious nodes must not equal or exceed 1⁄3 of all nodes in the system in a given vulnerability window.

In PBFT consensus rounds called views and divided into 4 phases.

  • A client sends a request to the leader node to invoke a service operation.
  • The leading node broadcasts the request to the backup nodes.
  • The nodes execute the request, then send a reply to the client.
  • The client awaits x+1 replies from different nodes with the same result, where x represents the maximum number of potentially faulty nodes.

#2 Federated Byzantine Agreement (FBA).

Instead of controlled by the one leader node in FBA, the node makes their own decision individually about who to trust.

To take their decision node have to join the small groups of nodes which they trust, the group called as quorum slice in FBA.

Commonly, quorums intersect if not, then there will be disjoint quorums which can lead to the recording of contradictory transactions.

#3 Delegated Byzantine Fault Tolerance (DBFT).

Used by: Neo.

DBFT is work same as PBFT using a one leader node but here to became leader node a node have to full fill the certain requirements of the network has set.

DBFT introduced by the NEO and allowing all NEO holders to vote for the delegate.

Became delegate in the network NEO set some requirements i.e, a verified identity, right equipment, and having 1,000 GAS (fees for processing transactions) become a delegate. One among those delegates is then chosen as speaker randomly.

The speaker task is creating a new block from the transaction that is waiting to be validated. Also, sends a proposal to the voted delegates who have the responsibility to supervise all the transactions and record them on the network. If 2⁄3 delegates agreed on speaker data then, the block added to the network.

Pros.

Fast and scalable.

Cons.

Not suitable for a public blockchain.

10. Directed Acyclic Graphs (DAG).

Used by: Iota, HashGraph, Byteball, RaiBlocks/Nano.

In above all types of consensus use different methods to verify the transaction and add that transaction to the block, which somehow connected to the previous block.

But in DAG instead of using blocks, it uses individual transactions linked to multiple other transactions for verifying the authenticity of transactions.

To get a better understanding. You know a typical blockchain have a linear structure where one-by-one blocks added to the chain, but in DAG each node holds a single transaction, and they arranged parallelly.

Pros.

Fast.

Energy efficient because their are no miner needed to verify transactions.

Highly scalable due to their non-linear structure.

Cons.

Hard to implement Smart Contracts.

Conclusion.

These are the different consensus algorithms utilized by the different crypto assets to stand out unique from others.

Also, the list is not containing all the consensus in the crypto world I choose only some unique once that we’re worth to mention in the post.

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