Blockchain technology is a decentralized and transparent network wherein no corporate body or government controls or validates transactions. It is a digital ledger that records every transaction that occurs on the network. Because hackers cannot change any information and all transaction activity on the blockchain network is made available to everyone, these transactions are highly safe and immutable.
A shared public ledger requires a functional, efficient, and secure consensus algorithm because the blockchain network is independent and decentralized, and for public blockchains to function internationally.
Blockchain Consensus Algorithm
A blockchain consensus algorithm is a process through which all of the peers in a Blockchain network agree on the current state of the distributed ledger in real-time. The backbone of blockchain is consensus mechanisms.
Why Blockchain consensus algorithm?
The blockchain consensus algorithm prevents malicious activities such as “double spending” attacks to provide an active service on the blockchain network. It enables the blockchain network to attain reliability and build trust between different nodes while ensuring security in the environment. This is why it is one of the vital parts of every Blockchain app development guide and every dApp project in the distributed ledger environment.
A consensus algorithm does two things: It ensures that the next block in a blockchain is the only version of the truth, and it keeps powerful adversaries from derailing the system and successfully forking the chain.
For clarity, we will be looking at a few consensus protocols in this article.
1. Unified Agreement
One of the prime goals of consensus mechanisms is achieving a unified agreement. In contrast to centralized systems, where trust in authority is required, users in a decentralized system can operate without building trust in one another.
The protocols included in the Distributed blockchain network ensure that the data used in the process is correct and up-to-date, as well as the status of the public ledger.
2. Align Economic Incentive
It’s critical to align the interests of network participants when it comes to creating a trustless system that controls itself. In this case, a consensus blockchain technology promotes good behavior while punishing bad actors. This also ensures that economic incentives are regulated.
3. Equitable & Fair
Consensus mechanisms allow anyone to join the network and use the same fundamentals. In this sense, the blockchain system’s open-source and decentralized properties are justified.
4. Avoid duplication of expenditures
Consensus mechanisms are based on algorithms that ensure that only the transactions that are validated and genuine are included in the visible public ledger. This eliminates the problem of double-spending, which occurs when a digital currency is spent twice.
5. Tolerant of Errors
Another advantage of the Consensus approach is that it makes the blockchain fault-tolerant, consistent, and dependable. That is, even in the face of failures and dangers, the regulated system would continue to function indefinitely.
Most popular Blockchain consensus protocols
Proof of work
Proof of Work was the first consensus protocol utilized in the blockchain network (PoW). Validators constantly process data from the block header through a cryptographic hash function in this time and energy-intensive protocol.
The blocks are represented by a linear structure, with each block consisting of a collection of transactions. To overcome its hard cryptographic challenges, PoW uses a specific sort of computer (ASICs), which requires a lot of computing power.
By racing to solve an exceedingly tough cryptographic puzzle, miners compete in proof of work to add the next block (a group of transactions) to the chain. The lottery is won by the first person to solve the puzzle.
The miner receives 12.5 newly created bitcoins as a reward for their labor, as well as a tiny transaction fee. The public and private keys issued to each user are used to validate and sign each transaction.
Proof of stake
Instead of investing in expensive computer equipment in a race to mine blocks, a ‘validator’ invests in the system’s coins.
In proof of stake, there is no coin mining. Instead, all of the coins are present from the start, and validators, also known as stakeholders because they have a stake in the system, are compensated solely through transaction fees.
The fraction of coins in the system you hold or set aside for staking determines your chances of being chosen to construct the next block in proof of stake. A validator with 300 coins has a threefold chance of being picked compared to one having 100 coins.
A validator’s block must still be committed to the blockchain once it is created. PoS has a significant disadvantage in terms of security when compared to PoW. Proof of stake replaces the “computationally unscalable” proof of work physical base with the aim of scalability: this change leaves PoS systems vulnerable to assaults.
Delegated Proof of Stake (DPoS)
Validators get transaction fees in exchange for maintaining the blockchain network and validating transactions in this consensus system. They are elected to aid in the consensus state of new blocks in this protocol, which is based on a voting system. The number of coins you have is proportional to your votes.
DPoS is best suited to voting-based systems with high verification speeds and throughput. The DPoS voting system is open to the public. Users can vote to remove the offending delegate immediately if they discover any signs of harmful behavior. DPoS, on the other hand, is partially centralized. As a result, people with more coins have more network power. It is also vulnerable to assault because only a few people are responsible for its maintenance.
Proof of coverage
The Helium blockchain uses the Proof of Coverage (POC) consensus protocol. The mechanism in the PoC protocol uses radio waves to check if Hotspots are delivering valid wireless coverage. In other words, PoC aims to ensure that Hotspots display accurate locations and that wireless network coverage is established. The miners get the rewards when the transactions are validated, and a new block is added to the blockchain.
Proof of space & proof of time
Proof of Time (PoT) and Proof of Space (PoS) are the two protocols that make up the Proof of Space and Time protocol (PoT). They are another key blockchain consensus protocol used by the Chia network for its blockchain network. On PoST, the miner has some free space in their system that they willingly provide to the blockchain.
Provers illustrate that they employ Proof of Space cryptography to allocate unused hard drive space for storage. To be recognized as a consensus method, Proof of Space must be coupled to Proof of Time. PoT ensures that block times are consistent across time and increases the overall security of the network. Proof of Space and Time is a new consensus protocol compared to PoW or PoS. It uses less energy and is faster than the PoW protocol, just like PoS.
Delegated proof of stake protocol
Delegated Proof of Stake (DPoS) is a different consensus protocol. It is a more democratic system because every token owner can say something about the blockchain. Like in an everyday democracy in DPoS, the token holders use votes and select their representatives. The representative’s role is to validate transactions and ensure their node is working smoothly.
When the new block is added to the blockchain, the representative gets some tokens. Then the representative shares these tokens with its voters. However, if someone has more tokens, that person gets more shares. DPoS uses less hardware and energy than PoS. One of the biggest disadvantages of the protocol is that sometimes delegates set up cartels and make the blockchain a less decentralized network.
Proof of Elapsed Time (PoET)
Intel Corporation (INTC) introduced the PoET idea in 2016.
PoET is a consensus technique for determining mining rights or block winners on permissioned blockchain networks. Before a potential participant may join a permissioned blockchain network, their identity must be verified. PoET uses a random selection to select which node will receive the new block, giving all network participants an equal chance of winning. A random waiting time is given to every network participant, and the first person to finish waiting gets the honor of committing the next block to the blockchain.
Transaction as Proof of Stake (TaPoS)
TaPoS is a consensus protocol that avoids nefarious acts such as falsely replicating a transaction from one blockchain to another. “Transaction replay” is the term for this. The hash of the most recent block header must be included in every transaction in the system. These transactions occur on the processors and help complete the task, resulting in successful mining. The PoS consensus protocol is modeled by this protocol. As a result, it has the same applications.
Proof of Importance (PoI)
PoI is used to show how nodes in a cryptocurrency system can be useful by allowing them to create blocks.
PoI assesses nodes using a range of measures, including net transfers, vested currency, and activity clusters, to name a few. Investors who deal with others on the network regularly receive a higher Proof of Importance score. Because it promotes coin circulation rather than coin hoarding, Hence, PoI becomes more stable and reliable.
The proof of importance protocol is best suited for applications that promote data modeling while also preventing currency hoarding and double-spending.
I’ve clearly explained how the most used blockchain consensus protocols work and differ from each other. There are also other consensus protocols, and new coins will create their consensus protocols in the future to solve particular issues.