Blockchain is a hot keyword that constantly appears in the headlines because of the popularity of cryptocurrencies like Bitcoin and Ethereum. Many organizations are using cryptocurrencies to create new revenue streams. And as we all know that the “heart” of the blockchain is the consensus algorithm. They simply understood consensus algorithms as mechanisms used in distributed computer systems to agree on a single data value or network state between computers in the system. There are tons of great consensus ideas. This article will briefly introduce that consensus.

Besides institutions implementing blockchain for various applications such as data security and identity verification of investors, these applications use multiple types of blockchain consensus mechanisms. Consensus mechanisms in the blockchain essentially help ensure that all nodes on the network are synchronized, and transactions are legitimate. This is necessary for blockchain networks to provide that every node is connected to the same network and that all transactions are verified regularly. Blockchain organizations and developers must make an informed decision in choosing a consensus mechanism that suits their desires. Different applications can determine other consensus mechanisms to bring—the best efficiency.

TYPES OF BLOCKCHAIN CONSENSUS MECHANISMS ​​

The consensus mechanisms in the blockchain can be divided into eight categories:

1. Proof of Work

Advantages:
Been running since 2009 and still working fine now

Defect:
Slow
It consumes a lot of energy
Used
Bitcoin, Ethereum, Litecoin, Dogecoin, etc.
Type: Competitive consensus.

Explain:
This is the first consensus algorithm introduced into a blockchain by Satoshi Nakamoto to create a decentralized consensus algorithm that solves the double-spend problem. PoW is not a new idea, but Satoshi combined it with several other concepts, such as cryptographic signatures, Merkle chains, and P2P networks, into a distributed system with the application of Bitcoin.

The way it works is that blockchain participants (called miners) have to solve complex math problems to add a block to the blockchain. The purpose of this is that users must use their resources (electricity, hardware investment) to validate data into the blockchain, also known as a mined block. Therefore, if you try to cheat, it will lead to the resources used for the mine being wasted, thus harming yourself.

The difficulty of the problem for miners also changes over time to ensure that the time to create a block is always about 10 minutes. Sometimes over one miner will mine blocks. In that case, I will choose one of the most extended strings as the main string. In short, the winning miner is the one who solves the problem the fastest and maintains the longest, so it is the most reliable. So Bitcoin is safe as long as there are over 50% honest miners in the network.

2. Proof of Stake

Advantages:
Energy saving
It costs more to attack

Defect:
nothing-at-stake problem
Used
Ethereum 2.0, Peercoin, Nxt.
Type: Competitive consensus.

Explain:
Proof of Stake was created as a solution to Proof of Work problems such as being more energy efficient. Instead of racing in a race to use powerful hardware to calculate and close the block, here, the probability of being closed is based on the number of shares that person holds. For example, if you keep 10% of the coins, the chance of getting the next mine block is 10%.

Bitcoin mining requires a lot of computing power to run different cryptographic algorithms. There are many miners running that calculation program, so it needs a considerable amount of electricity to generate a block. A 2015 statistic showed that a single Bitcoin transaction requires electricity to power 1.57 households per day. So the power problem is a big problem for PoW that PoS can solve.

In terms of safety, if you try to attack, you will lose the money you stake. Here losing money means that the value of this blockchain’s token will be depreciated because people don’t believe in it anymore, which means the value you stake will also go to 0. Unlike POW, you only spend electricity and the machine you are still there. Another problem is that nothing at stake is a security hole that occurs when a fork occurs on the chain. Because mining does not cost as much as PoW, the strategy will be to mine in both branches when the separation occurs and spend in 1 branch, and then mine in the other unit with such a double spend. There are many ways to solve this problem which are covered in further reading. For example, the solution is to punish miners for such fraud.

3. Proof of Authority

Advantages:
Energy saving
Fast

Defect:
No dispersion. It can be used in public blockchains but is more commonly used in private blockchains and permissioned blockchains.
Used
POA.Network, Ethereum Kovan testnet, VeChain
Type: Collaborative consensus.

Explain:
In PoA transaction networks, approved accounts validated blocks called validators. Validators run software that helps them push transactions to block blocks, a fully automated process.

There will be three primary conditions to become a validator :

It must verify identity on-chain, with the ability to cross-check that information on a publicly available domain.
The conditions to be validators must be challenging to achieve. (for example, nodes that want to become validators must be licensed)
There must be complete unanimity in checking and establishing an authority
With validators, there needs to be an incentive to keep the position they have reached. By assigning reputation to identity, validators are incentivized to keep the transaction going, as they don’t want to lose importance, so losing the hard-earned validator role.

4. Proof of Elapsed Time

Advantages:
Fairness: Low cost of participation. So many people can join quickly, hence decentralized.
Authenticity: Easy to check legitimately elected leaders for all participants.
Investment: The cost of controlling the leader election process is directly proportional to its value.

Defect:
Not suitable for public blockchain
Used
Hyper-ledger Sawtooth
Type: Competitive consensus.

Explain:
PoET is a consensus algorithm commonly used in permissioned blockchain networks to decide mining rights or winners in mining blocks. permissioned blockchain networks are networks that require any participant to register for an identity before they are Allowed to join. Based on the principle of random, where every node is equally likely to be a winner, the PoET mechanism is based on spreading a fair chance of winning over the most important number of nodes taking part in the network.

The operation of the PoET algorithm is as follows. Each validator in the network must wait for a time randomly selected from a function called (the trusted function ), and the first node to complete the specified timeout will be chosen as the leader. Each node in the blockchain network generates a random timeout and sleeps for that time. The first to wake up – the one with the shortest waiting time – and commits a new block to the blockchain, broadcasting the information to the entire network. The exact process repeats to generate the next block.

The PoET network consensus mechanism needs to ensure two critical factors. First, the taking part nodes have to choose a genuinely random time. Two is the real winner who completed the waiting time.

The PoET concept was invented in early 2016 by Intel, the famous chip manufacturing giant. They provide a high-tech tool to solve the “random leader election” computing problem.

This mechanism allows applications to execute trusted code in a protected environment, ensuring both requests for randomizing timeouts for all participating nodes and correctly completing the timeouts of participants.

The mechanism for executing trusted code in a secure environment also covers other essential network needs. It ensures that trusted code runs in a safe environment and has not been altered by external participants. It also provides that the results are verifiable by participants and external entities, thus enhancing the transparency of network consensus.

PoET controls the cost of this consensus process and maintains a fast pace so that prices remain proportional to the value derived from the process, an essential requirement for the cryptocurrency economy to grow.

5. Proof of Capacity

Advantages:
Similar to PoW but uses space instead of computation. So much environmentally friendly.
It can detect malware by determining if the processor’s L1 cache is empty.
It can be used as anti-spam and anti-denial of service attack measures.

Defect:
System participants get little profit.
Used
Burstcoin, Split, SpaceMint
Type: Collaborative consensus.

Explain:
Proof-of-space (PoSpace), also known as Proof-of-capacity (PoC), is a method of allocating memory or disk space to solve the problem given by the service provider. Dziembowski elaborated this concept et al. in 2015.

Proof of Space is quite similar to Proof of Work, except that there is storage capacity instead of using computing power.

Proof-of-space is a piece of data that a prover sends to another prover to verify that they have reserved a certain amount of space. One way to implement PoSpace is to use hard-to-pebble graphs. A verifier will then ask the prover to label the hard-to-pebble diagram. The prover will commit the labels. The verifier will then ask the prover to open some random place in the commit.

Proof of Space is arguably a fairer, more economical solution than Proof of Work.

6. Proof of Identity

Proof of Identity compares a user’s private key with an authorized identity. Proof of Identity is cryptographic proof for a user’s private key that is cryptographically attached to a particular transaction.

Any user identified from the Blockchain network can create a block of data that can be displayed to anyone in the network. Proof of Identity ensures the integrity and authenticity of the generated data. In addition, smart cities can use Blockchain consensus mechanisms such as Proof of Identity to verify the identity of their citizens.

7. Delegated Proof-of-Stake

Advantages:
Energy saving
Fast

Defect:
Concentrate.
Participants who stake a lot can vote themselves to become validators.
Used
BitShares, Steemit, EOS, Lisk, Ark
Type: Collaborative consensus.

Explain:
In DPoS, the stakeholders will elect witnesses to replace them in mine blocks. This process will be slightly faster than PoS. For example, in EOS, the system will comprise 21 people who will be selected as witnesses and will always keep that number so if one person tries to cheat or has a problem, will set up another person to replace them immediately.. These witnesses will also be paid a fee (depending on the stakeholders) for creating the block.

Usually, witnesses will generate one block at a time and follow a round-robin strategy. If a witness fails to create a block on his turn, the stakeholders will vote for other witnesses to be more efficient.

DPoS, miners do not have to compete like PoW or PoS, so the speed will be much faster. EOS, for example, only takes 0.5s per block.

8. Proof of Activity

Advantages:

PoA combines to use PoW’s hashing system and PoS’s digital signature.

It reduces the chance of an attack by 51%.

Maintain the difficulty level to protect the network.

PoA is fault tolerant because the entire system will never shut down completely.

Provides earning opportunities for both miners and network validators.

Defect:

The following are the disadvantages of the Proof of Activity mechanism:

High energy consumption for mining blocks.

Due to a lot of computation, the mining process takes a lot of time.

Requires expensive hardware to solve the algorithm.

Explain:

To avoid hyperinflation (when there are too many coins in the system), bitcoin will only generate 21 million bitcoins. That means that bitcoin block rewards will end at some point, and bitcoin miners will only receive transaction fees.

Some have speculated this could cause security issues as everyone acts out of self-interest and crashes the system. So, Proof of action was created as a structure that could replace the current bitcoin consensus. Proof of activity is a hybrid method combining proofs of work and Proof of stack.

In Proof of activity, mining begins in a definitive proof of work fashion, with miners racing to solve a cryptographic puzzle. The system switches to Proof of stack when the number of coins is no longer issued. The more cash you own, the more likely you will be chosen.