March 12, 2020

5 Popular Consensus Algorithms Used In Blockchain

Hira Tariq

What is Consensus:

Consensus in literal terms means agreement. In Blockchain network nodes have to agree on the current state of Blockchain before adding a block. For this purpose, different Blockchain platforms use different kinds of algorithms. In this article, we will be discussing the top 5 most popular consensus algorithms that are used in Blockchain.

Proof of Our Work (PoW) :

Proof of work is the most popular and common consensus algorithm knowingly used by Bitcoin and Ethereum Blockchain. In Proof of Our Work, a block is mined by the miners. When transactions are collected and a block is formed then miners are required to perform computational efforts to find out the nonce of the block. This process also describes the difficulty level of the Blockchain at the current time. Miners have to solve puzzle-like problems and each miner is in a race with each other. Whoever solves the puzzle first gets the right to mine the next block in Blockchain. This mining difficulty is not constant. In Bitcoin, a block is mined every 10 minutes average but in Ethereum block difficulty is low which compels the miner to mine a block in every 15-20 seconds. Proof of Our Work can be hacked by a commonly known attack known as 51% attack. But to do 51% attach one has to own 51% computational power of the network which is not a small thing. Proof of Our Work is not energy-efficient yet, it is popularly used by Bitcoin, Ethereum, Litecoin, Dogecoin etc.

Proof of Stake (PoS):

Usually taken as an alternate to Proof of Our Work, Proof of Stake does not involve mining. But a block is forged or verified. Forger must have to stake some coins into the system to participate in the process. If a forger owns 10% of the stake coins then he will have 10% more chance than others to forge the next block. But this selection mechanism brings out a question. What if someone owns 51% of the staked coins? Then?

Well, the process is not just straight forward of selecting the next forger. More parameters and methods are also used on top of % factor. Randomization and Coin Age Selection are also two factors to select the next forger. Proof of Stake is faster than Proof of Our Work because there is no time needed to solve the puzzle and also it is much more eco-friendly. These Blockchains have adapted to this consensus algorithm Ethereum (soon), Peercoin, Nxt.

Delegated Proof of Stake (DPoS):

In Delegated Proof of Stake, stakers can elect their leaders who can verify the block on their behalf. This makes DPoS faster than PoS. Let’s take the example of Tron to understand it better how it works. In Tron there are 27 Super Representatives (SRs). They produce blocks for the network. To become a voter you have to freeze your TRX (Tronix). As a result, they can vote for SR candidates. SRs are selected on the basis of criteria such as projects they sponsor and reward distributed to voters. Tron’s DPoS consensus algorithm makes Tron much more scalable with 2000 TPS as compared to Bitcoin’s 3 TPS and Ethereum’s 15 TPS. Different Blockchains such as BitShares, Steemit, EOS, Lisk, and Ark have implemented DPoS in a slightly different manner but the core mechanism is the same for all. 

Proof of Burn (PoB):

In Proof of Stake, you have to stake your coins into a system to become a validator/forger. But in Proof of Burn, you have to send your coins to an address from where you can’t get them back. Basically, this address is Zero address but it’s not compulsory. This process is known as Burning. By committing this act you can earn a rightful place as a miner for a lifetime on a system where miners are selected randomly.
The more you burn, the more your chances are to be next miner. Interesting isn’t it. Although miners can burn the native currency of the Blockchain but can also burn Bitcoin or other currencies in some other cases. As time moves on your stake decay and you would have to burn more coins in order to get selected in random selection. But this consensus algorithm is criticized in a way that mining power goes to those who are willing to burn more. This interesting consensus algorithm is used by Slimcoin, TGCoin (Third Generation Coin).

Practical Byzantine Fault Tolerance (pBFT):

Practical Byzantine Fault Tolerance is a consensus mechanism which is used to overcome popular “Byzantine General Problem”. In pBFT all nodes are independent nodes. They can be honest or dishonest. All nodes are sequenced under one node which is the “Leader” node. In the process of coming to a consensus, all nodes communicate with each other and the ultimate goal is to reach an agreement on the current state of the system through a majority. In order to be an honest node, nodes have to prove that a message has been propagated from a specific peer node, but also need to verify the state of the message was not modified during propagation. 

pBFT works on the assumption that the ratio of malicious nodes can’t exceed 1/3rd of the total node. As more nodes are in the network it is relatively hard to reach this ratio. Each consensus of pBFT is called a view and contain 4 phases.

  1. A client sends a service request to the leader node.
  2. Leader node spreads the request to the network nodes.
  3. Nodes execute the request and send a reply to the client. 
  4. The client waits for the same replies from each node and this same reply is the result of the operation.

The leader node is changed in Round Robin style on each view. This sophisticated consensus algorithm is popularly used by Hyperledger Fabric, Stellar, Ripple, Dispatch.

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