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META 1 Coin Report: A Quick Review of the Top Consensus Mechanisms

Consensus protocols are a term used to describe the process of achieving validity on a decentralized network. These systems are what confirm new transactions and maintain records of the past. As such, they are a crucial component of every blockchain network.

There has been a lot of changes in the way decentralized networks remain secure since Bitcoin first introduced the world to blockchain technology 12 years ago. At that time, the Proof-of-Work consensus mechanism was the first in the world to solve the notorious double-spend issue. The double-spend issue was a problem faced by all previous cryptocurrencies.

Double Spend Conundrum

The double-spend issue refers to a hacking technique in which a person sends two transactions using the same coins at nearly the exact same time. The goal of the attack is to have the second transaction process before the first has been confirmed. Notably, Bitcoin solved this problem by adding a timestamp into its PoW hashing algorithm.

Since then, developers have conceived many new ways to provide security against these and other attacks. Notably, one of the main reasons that the blockchain sector has matured so quickly is the introduction of new and more efficient consensus protocols. Here are some of the top consensus mechanisms in use today.

Proof-of-Work (PoW)

The PoW consensus algorithm was the first and most widely used consensus protocol. This system requires network nodes, also known as miners, to validate the state of the network. To accomplish this task, they continually monitor the state of the blockchain seeking out new transactions to validate. These transactions are placed into blocks and then added to the blockchain.

Notably, every node validates the network state but only one gets to add the next block of transactions to the blockchain and receive the reward. To be chosen as the recipient of the PoW reward, you must be the first miner to solve a complex mathematical equation. This equation is so difficult that your computer deduces that it’s faster to make random guesses than actually compute the equation.

In Bitcoin’s blockchain, this mathematical equation is called SHA-256. The SHA stands for Secure Hashing Algorithm. The answer to the SHA equation must begin with four zeros to be valid. Notably, whenever the network seeks to increase the mining difficulty, the equation will simply require more zeros at the front of the SHA-256 equation’s answer. Notably, examples of PoW blockchains include Bitcoin, Litecoin, Ethereum, Dogecoin, and many more.

Proof of Stake

The Proof-of-Stake consensus mechanism is the second most common type of network validation in use within the blockchain sector. The PoS mechanism was built to overcome some of the shortcomings of PoW systems. For one, it does away with the use of miners. This removes the need to compute large equations which reduces the network’s electricity demands and overall carbon footprint.

PoS networks place the validity of the system in the hands of regular users. In a PoS network, users stake their tokens in network wallets to keep the network valid. Staking is a term that refers to locking your cryptocurrency into a smart contract. This approach democratizes the security of the network because it eliminates the need to purchase expensive mining rigs.

In most PoS networks, you need to meet minimum staking requirements in terms of total coins staked and time-locked to be eligible to secure the platform. The strategy ensures that only those with a vested interest in the network handle its security. Think about it, to corrupt a PoS network, you would need to purchase a majority of the project’s coins first.

Notably, PoS networks include NXT and NEO. Ethereum, the world’s second-largest PoW blockchain is in the midst of converting to a PoS mechanism. This update will provide the network with more scalability and faster responsiveness.

Delegated PoS

Delegated PoS is similar to PoS networks in that it doesn’t require miners. However, it does take the validation process and make it more exclusive. Rather than letting anyone validate transactions, a DPoS network introduces special nodes called Validators.

In most networks, to become a validator you must stake a certain amount of coins. There are also some blockchains that randomly chose Validators or even allow the community to elect these users. Regular users can then delegate their staked coins to Validators for a share of the network rewards. Popular examples of Delegated Proof-of-Stake networks include META 1, EOS, Tezos, and Cardano.

Hybrid PoW/PoS

Recently, there has been the introduction of hybrid consensus mechanisms. The goal of these protocols is to combine the superior security of PoW systems with the scalability and responsiveness of PoS networks. In most instances, these protocols introduce a special node that handles the final approval of transactions via a PoW mechanism.

Decred’s Proof of Activity is a prime example of a hybrid consensus mechanism in action. This protocol combines multiple aspects of PoW and PoS in a unique manner. For one, the mining process is similar to PoW in that miners compete to add the next block of transactions to the blockchain. Once a transaction is validated, it’s broadcast across the network.

The system then takes these mined blocks and combines them with 3-5 randomly selected PoS participants. From there, the remaining PoS users vote on the validity of the blocks. The system is set up to not recognize a new block as valid until it includes at least 3 votes. Consequently, the PoS verification layer significantly boosts the network’s security and resistance to attacks.

The PoS nodes are also responsible for block voting, voting on changes to the consensus rules, and voting on project-level management. In the Decred network, this is done leveraging the Politeia Proposal System. This is just one example of some of the cool ways developers have managed to combine these systems.

Many More Consensus Mechanisms Today

These are just a few of the consensus mechanisms in use at this time. Some other noteworthy options include Proof-of-Authority, Leased Proof-of-Stake, Practical Byzantine Fault Tolerance (PBFT), Proof of Importance (PoI), Proof of Burn (PoB), Proof-of-Space, Proof-of-Capacity, and Proof-of-Authority. As you can see, the consensus sector continues to expand rapidly. You can expect this sector to see more growth as new and more innovative networks enter service in the coming weeks.

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