In this article, we dive into one of the core base layer tech features which almost every Blockchain has – Proof Consensus.
Proof Consensus Mechanisms control the read/ write privileges for Data on a Blockchain, depending on the type of proof consensus algorithm. Here we explain eight different types of proof consensus algorithms.
While this isn’t exactly a casual read, we believe all cryptocurrency enthusiasts (experts/ newbies) will have a better understanding for one of the core layer features of a Blockchain and might also help broaden their vision for this industry.
#1 – Proof-of-Work (PoW)
The Proof-of-Work algorithm was the first Consensus algorithm which has demonstrated its integrity and security since 2009.
PoW gives way to Mining. Mining is a term used to describe the process of calculating mathematical equations encoded on different Blocks in a Blockchain. The process of attaching these equations is known as Hashing. That is why when a solution is generated and added to a Blockchain Ledger, it is a hash consisting multiple different characters.
Transactions > Bundled into Blocks > Mining > Declaration Block is Valid
The Miner solves his functions by using computing power which translates into Hashing Power for the network. Your Hashing Power defines how soon you can mine and apend a Block. The Miner has to be reimbursed in the form of Transaction fees and a portion of the new tokens generated through the Block. Mining is the only way to generate new Blocks which generate new digital tokens in a PoW Consensus Basis. Mining in a much simpler language would be a Miner using electricity for computational power to mine and receive incentives in the form of digital tokens, then pay off the electricity cost and enjoy the profit. In a much broader basis this is a conversion – FIAT > Digital Tokens.
#2 – Proof-of-Stake (PoS)
This new consensus algorithm, as the word ‘stake‘ would suggest, benefits the shareholders of the specific token. Proof-of-Work uses different types of computational hardware required by different types of tokens and then you have the added cost of Energy being consumed.
PoW is not energy efficient. A new Block is created by the hardware but that leads to a higher difficulty for the next Block which means more time and it all translates into using more energy. Proof-of-Stake removes mining through computational power and provides the mining rights to each of the stakeholders who own the token, giving the network control to the stakeholders without using any energy or expensive hardware. Many new tokens coming onto the Blockchain are realizing the need to stop wasting energy through PoW and start using PoS.
#3 – Delegated Prood-of-Stake (DPoS)
Delegated Prood-of-Stake is an intriguing mechanism developed by Researchers at the University of Michigan. USA. EOS, a Blockchain Network, is currently utilizing this consensus mechanism.
DPoS states that any individual, initially, will have the power of choosing their Block Maker/Generators through a constant approval voting process. Anybody can partake in this election. Now if the individual pulls it off, they will have the chance to generate a block with respect to the votes aggregate. DPoS is by far the fastest, most efficient, most decentralized, and most flexible consensus mechanisms available in the market.
#4 – Proof-of-Burn (PoB)
This is one more consensus mechanism other than PoW and PoS, although PoB requires the Miner to ‘burn‘ any cryptographic token. No not actually light it on fire, but something similar to that.
The Miner has to show proof that the token has been sent to a verifiable un-spendable wallet address. This process provides the Miner with a status of the Blockchain and the following Block, which transfers the reward in the token which the Blockchain was made for to the Miner actual wallet address.
#5 – Practical Byzantine Fault Tolerance (PBFT)
Distributed networks can also use PBFT as a consensus mechanism.
In PBFT, every node distributes a public key, which leads to every message being designated for confirming its organisation. Now when multiple different reactions occur, that makes the Blockchain reach consensus and validate the message/ transaction as legitimate. PBFT was designed for low-latency networks. It is a better mechanism for a non-profit as there is no energy consumption and trust is completely disconnected from asset ownership. PBFT is currently in use by Hyperledger.
#6 – Proof-of-Identity (PoI)
PoI is a piece if cryptographic evidence which leads to the knowledge that the individual knows the private key which compares to an authorized identity. As an added measure, the identity is also cryptographically attached to that specific transaction.
#7 – Proof-of-Elapsed-Time (PoET)
PoET follows a fair lottery system with the determination that each member of the Blockchain has an opportunity to offer a Block.
There are specific local enclaves which grant a hold-up time to these members. Now the member with the shortest hold-up time is the nest Block creator. All things considered, PoET creators compare their consensus mechanism to PoS.
#8 – Proof-of-Importance (PoI)
This consensus mechanism was first introduced by NEM, a digital token currency on the Blockchain.
The valuation is not purely dependent on the token balance here. NEM also remunerates productive system actions. Staking a Block for NEM requires notoriety level, token balance, and the number of transactions made both ways. These factors present the member’s importance level.
These are the eight consensus algorithms/ mechanisms you should know about. However Blockchain as a technology is still in its infancy stage, which means, there are multiple innovations to come with new consensus algorithms taking the place of these consensus mechanisms.