4. Consensus Mechanisms : Blockchain
In the process to study Blockchain, Consensus is one of the most important things to take care of. You must’ve read about blockchain in my recent articles.
When you will google What is the meaning of Consensus? You will get the result as “agreement among a group of people”, which is the basic idea behind whole Blockchain technology. Let’s understand this now.
The term consensus mechanism refers to the entire stack of protocols, incentives, and ideas that allow a network of nodes to agree on the state of a blockchain.
In simpler terms, A consensus mechanism refers to any number of methodologies used to achieve agreement, trust, and security across a decentralized computer network. By consensus, we mean that a general agreement has been reached.
Why do we need a Consensus Mechanism?
For example, In any centralized system, One database holding all the data comes with one central administration working as a central authority to maintain and update the database, who remains the sole in charge to make sure that it is genuine data.
While Public Blockchains operate independently and decentralized without any single authority worldwide. They involve hundreds of thousands of different participants in operations working together on verification and authentication activities for transactions to take place on the blockchain. In such an environment, Blockchain needs an efficient, fair, real-time, functional, reliable, and secure mechanism to ensure that all the transactions occurring on the network are genuine and that all participants agree on a consensus on the status of the ledger(data).
This most important work is done by the Consensus Mechanism, which is a set of protocols, ideas, and incentives to ensure the legitimacy of data and contributions done by contributors( (i.e., nodes or transactors) on the blockchain.
Types of Consensus Mechanisms:
There are different kinds of Consensus Algorithms, which have different principles.
Proof of Work(PoW) : Its most common consensus algorithm is used by big cryptocurrencies like bitcoin, dogecoin, litecoin, etc. It requires a node to prove that the work done qualifies to add a valid transaction, but this whole mining and validation mechanism needs High Energy Consumption and Longer Processing Time.
Proof of Stack(PoS) : This algorithm/mechanism was developed as the alternative to PoW as It’s Low Cost, Low Energy consuming mechanism, How? It involves the allocation of responsibility for maintaining data in proportion to the number of virtual currency tokens held by the participant node. The drawback of this mechanism is it incentivizes crypto coin hoarding instead of spending. Like, As for the ETH blockchain, Proof-of-stake is done by validators who have staked ETH to participate in the system.
Actually, if we go a little deep into technicality, Proof-of-work and proof-of-stake alone are not consensus protocols, but they are often referred to as such for simplicity. They are actually Sybil resistance mechanisms and block author selectors; they are a way to decide who is the author of the latest block.
While PoW and PoS are the most common Consensus Mechanism, there are many other consensus algorithms available in the field with different principles like:
- Proof of Activity (PoA) which is a combination of different aspects of PoS and PoW.
- Proof of Capacity (PoC) works on basis of the capacity of memory and hard disk space a node has.
- Proof of Burn (PoB) requires a little amount of currency to send to validate the transaction as in burning them.
- Proof of History (PoH) works on the basis of past passage of transactions which was developed as part of the Solana Project similar to Proof of Elapsed Time (PoET).
Final Words
- There are many consensus algorithms and mechanisms developed over time for different blockchains and principles, Like ETH is shifting its PoW mechanism to PoS to reduce energy consumption and processing time.
- Consensus Mechanisms are important to know if you want to study the working of Blockchain Networks and Cryptocurrencies. This is just the tip of the ice, just to give you an idea of what is for you in it, if you want to research and go in depth about these concepts.
- I am bringing this series of blogs on Blockchain to explain the technology in the simplest explanation possible. If you still have some doubts or ideas, We can connect and discuss 👇
https://www.linkedin.com/in/prakashag/
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