Blockchain Consensus Protocols
Consensus protocols form the very fundamentals of blockchains where independent nodes, validate transactions on the network, i.e. the very basic concept of decentralized ledgers.
A network becomes susceptible to attack if any malicious entity gains control of 51% of the network (known as a 51% attack). Before we move on to cover the principals of CBC (Correct-By-Construction) protocol, as used by CSPR, in a separate post, lets first cover a few types of popular (and some less popular) consensus protocols:
- Proof of Work (POW) – as implemented by Bitcoin, LiteCoin and Ethereum (currently).is one of the first consensus protocols used in blockchain applications.
The mining (transaction validation) aspect of Bitcoins has to do with solving the cryptographic puzzle of finding a random integer that leads to hashes with a specified number of leading zeros. Every transaction is validated and signed using the public and private keys assigned to each user. It is a power-hungry and resource-intensive protocol as it favours participants with superior computational power and also creates wastage with some nodes successfully validating. However the block is dropped due to duplication of work. The primary principal behind this protocol is asymmetry – make the computation of the transaction costly but the verification, cheap. This asymmetry between verification and updating of ledgers results in more comfortable access to the ledger and greater resistance to changing values in the ledger.
- Proof of Stake (POS), transactions are validated by a network of nodes, each with crypto currency delegated (staked) onto the node (either by the validator and/or delegates to the node). This is a key requirement in POS protocols, as miners are required to stake tokens to the network and rewards are earned not based on brute force computing power but calculated based upon the quantity of tokens pledged to a node. Mining occur by selection of validator according to their economic stake on the network. This avoids centralisation (the creation of mining pools) and provides a chance for all nodes to mine.
- Proof-Of Space (PoSpace): This is similar to POW, however instead of computational power, disk storage is used to validate transactions. As with how POW incentivises for greater computational power, PoSpace incentivises greater disk space with the most considerable disk space allocated to the block. Disadvantage is that it is resource bias.
- Proof if Elapsed Time (PoET): A permissioned blockchain system developed by Intel, where blocks are allocated to miners only after the identity of the miner is determined. Each node in the network is assigned a random waiting time. Requires specialized hardware.
Disclaimer: This article is written for the purposes of research and does not constitute financial advice or a recommendation to buy.