Consensus Mechanisms in Blockchain

Consensus Mechanisms in Blockchain

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Updated on Jan 27, 2023 13:22 IST

Consensus mechanisms in blockchain impose a set of rules to keep members (or nodes) synchronized in a decentralized network.

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Introduction

The more, the merrier. However, more people means more ideas and opinions as well. Before starting with consensus mechanisms in the Blockchain network, let’s begin by understanding what does consensus mean?

In a decentralized network like blockchain collecting everyone’s agreement on a single change sounds tedious. Evidently, it is! 

Even so, it’s hard to reach the full consent of every member in the network, yet, people managed to do so by establishing governance. Fighting against the monarchy ruled by giants, blockchain comes with its own challenges. One of the major confronts is reaching a consensus or global agreement.

What is Consensus?

Consensus means achieving a state of a decision on which all network participants agree. For example, a group of friends decides on a trip to Goa without conflicts. Here, reaching a decision to visit Goa together is a state of consensus or mutual agreement. 

However, getting a no-conflict decision agreement by each person in a group seems far-fetched. Maybe someone wants to go to Manali instead. How could a group of friends possibly reach a consensus? Moreover, how can numerous strangers achieve consensus in a network?

In order to avoid centralization and conflicts among members, the system requires a consensus mechanism or algorithm.

What is Consensus Mechanism?

A consensus algorithm is a way to keep network members synchronized under democracy. With decentralization, each network member has equal power to make decisions in the system. Hence, rules need to be established for network members (or nodes) to implement new changes to the system with a global agreement.

“The purpose of the Consensus mechanism in a decentralized network is to allow a group of independent nodes to distribute the right to update as well as validate the change in the network equally. Therefore, decide on the next update of a decentralized network.”

In a blockchain, each participant shares the exact same copy of the network transactions, which helps them stay synchronized and connected. 

How Does Consensus Work?

There is a number of consensus mechanisms to operate on a decentralized network. Each algorithm has its own way of reaching a global agreement on a network update.

Generally, consensus protocols form at least 51% of participants in the network to agree on the upcoming change. If they agree, the network system gets updated with the new change. Else, it rejects the change by mutual agreement.

Let’s see what the renowned consensus algorithms do to reach a global network agreement?

Types of Consensus Mechanisms

Following are the consensus mechanisms used in various blockchain networks:-

types

Proof of Work (PoW)

PoW is a popular consensus algorithm used by Bitcoin and Ethereum networks. Here, miners (or block adders) have to do heavy mathematical computations to find a right hash by changing the nonce of the block. The miner who finds the hash below the difficulty level gets the chance to add his block to the network. Hence, takes the reward.

It’s a puzzle-friendly way to reach consensus by using high computational power.  Afterward, already present network participants valid transactions in the block added by the miner.

Blockchains using PoW algorithm: Bitcoin, Ethereum, Dogecoin, Litecoin, Zcash, Horizon, and many more.

Proof of Stake (PoS)

PoS consensus eliminates the high energy consumption by PoW. PoS uses a staking mechanism in which miners (or validators) hold some of their earned coins in the network to get selected for adding a block.

It’s not an initial consensus algorithm for a network. It can only be implemented after a network gets a good amount of participants (or nodes).

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Blockchains using PoS algorithm: Polkadot, EOSIO, Cardano, Ethereum 2.0, and many more.

Delegated Proof of Stake (DPoS)

Delegated Proof of Stake (DPoS)
Delegated Proof of Stake (DPoS)
Delegated Proof of Stake (DPoS) is an additional layer of voting to the traditional Proof of Stake Consensus Mechanism. Let’s see how does it exactly work with the network governance.
dpos

Blockchains using the DPoS algorithm: EOS, Lisk, Ark y Tron

Proof of Importance (PoI)

Proof of Importance (PoI) in Blockchain
Proof of Importance (PoI) in Blockchain
Proof of Importance (PoI) in blockchain sets new standards for network participants or coin hoarders to become eligible for harvesting a new block of transactions in the network. It rewards...read more
poi

Blockchain using PoI algorithm: New Economy Movement (NEM)

Proof of Capacity (PoC)

Proof of Capacity (PoC) in Blockchain
Proof of Capacity (PoC) in Blockchain
Proof of Capacity in blockchain is an alternative solution to the problems by proof of work and proof of stake. It uses the storage capacity for mining a block in...read more
poc

At the time, the miner just uploads the calculated files of possible hashes to the network. PoC reduces the time taken to add and validate the block of transactions.

Blockchains using PoC algorithm: Burstcoin, Storj, Chia, and SpaceMint.

Proof of Elapsed Time (PoET)

Proof of Elapsed Time (PoET) in Blockchain
Proof of Elapsed Time (PoET) in Blockchain
Proof of Elapsed Time in blockchain uses a time-lottery-based consensus mechanism, distributing wait time to each participating node in the network. Proof of Elapsed Time in blockchain uses a time-lottery-based consensus...read more
poet

Afterward, the block verification takes place by network validators, and a new block gets added.

Blockchain using PoET algorithm: Hyperledger Sawtooth

Proof of Activity (PoA)

Proof of Activity (PoA) in Blockchain
Proof of Activity (PoA) in Blockchain
Have you ever wondered what Proof of Activity is in the context of blockchain? It's a consensus mechanism that blends Proof of Work and Proof of Stake elements. In this...read more
poac

Afterward, one empty block gets chosen based on the number of coins they hold in their respective accounts. Then, the miner of that empty block gets the chance to add its transactions to the block. Moreover, the transactions are verified by network validators.

Proof of Authority (PoA)

Proof of Authority (PoA) in Blockchain
Proof of Authority (PoA) in Blockchain
Proof of Authority is a consensus mechanism that relies on the validator’s reputation to properly make the blockchain network work. It’s environment-friendly and has a faster algorithm. Let's understand more...read more
poaut

Blockchain using PoA algorithm: VeChain

Proof of Burn (PoB)

Proof of Burn (PoB) in Blockchain
Proof of Burn (PoB) in Blockchain
Proof of Burn in the blockchain is a consensus algorithm that allows miners to add their block by sending some of their coins to an unspendable account. Proof of Burn...read more

PoB eliminated the burnt coins permanently from regular transactions. Hence, they become unspendable even by its owner.

The more coins a miner burns, the higher his chances of adding his new block of transactions to the network. Burning coins brings virtual mining rights to the miner.

Blockchain using PoB algorithm: Slimcoin

Byzantine Fault Tolerance (BFT)

Byzantine Fault Tolerance (BFT) in Blockchain
Byzantine Fault Tolerance (BFT) in Blockchain
Byzantine Fault Tolerance (BFT) is a consensus mechanism that works on resolving Byzantine Generals’ problem in a decentralized network.
bft

BFT mechanism regulates the communication between nodes using hashes, digital signatures, and metadata. It embraces the synchronization among nodes of a decentralized network. 

Blockchains using BFT algorithm: Hyperledger Fabric and Zilliqa

Pros and Cons of Consensus Mechanisms

PROS CONS
– Establishing global agreement in a distributed network.

– Create protection and security against intruder attacks.

– Mechanisms are available for both permission and permissionless blockchain networks.
– Few of the mechanisms consume high power and energy, leading to environmental hazards.

– Some of the mechanisms are susceptible to 51% attacks and Sybil attacks.

– The constant fear of turning a decentralized network into a centralized one.

In Conclusion

In the above article, we had a detailed understanding of consensus mechanisms used by blockchain technology. We also covered a brief of each consensus algorithm in blockchain networks.

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FAQs

What is a 51% attack on a network?

A 51% attack means gaining at least 51% of the computation power of the whole network (in the case of PoW), else gaining 51% of staked coins in the network (in the case of PoS).

What is Sybil Attack?

A single node that pretends to be multiple nodes for responding in the attacker's favor. Here, an attacker can control and manipulate the network with the majority.

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