Consensus mechanisms in blockchain impose a set of rules to keep members (or nodes) synchronized in a decentralized network.
- What is Consensus?
- What is Consensus Mechanism?
- How does consensus work?
- Types of Consensus mechanisms
- Pros and Cons of Consensus Mechanisms
- In Conclusion
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:-
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).
Blockchains using PoS algorithm: Polkadot, EOSIO, Cardano, Ethereum 2.0, and many more.
Delegated Proof of Stake (DPoS)
Blockchains using the DPoS algorithm: EOS, Lisk, Ark y Tron
Proof of Importance (PoI)
Blockchain using PoI algorithm: New Economy Movement (NEM)
Proof of Capacity (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)
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)
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)
Blockchain using PoA algorithm: VeChain
Proof of Burn (PoB)
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)
Blockchains using BFT algorithm: Hyperledger Fabric and Zilliqa
Pros and Cons of Consensus Mechanisms
|– 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 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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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.