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In recent years, blockchain technology has emerged as a solution to numerous industries, offering a functional, decentralized, transparent, and secure layer for data management.
As compared to standard centralized systems, where one authority administers the whole network, blockchain adopts decentralized consensus techniques to certify and confirm the transactions.
These are the consensus mechanisms that make blockchain so powerful and allow a network to be trustworthy without the need for a central authority.
This article will explain how blockchain consensus mechanisms work, the role they play in maintaining the integrity of the network, and how different forms of consensus algorithms address the special difficulties that come up in blockchain systems.
Towards the end of this article, it is safe to assume that readers will be aware of the significance of the consensus mechanisms in blockchain technology and how consensus mechanisms aid the maintenance of a secured and decentralized network.
Blockchain Consensus Mechanisms Made Easy
At its most fundamental level, a blockchain forms a distributed ledger technology (DLT) in which sets of participants (known as nodes) agree on the blockchain’s state without the need for any central authority.
Blockchain networks are very open, decentralized networks that utilize cryptographic procedures to guarantee the knowledge stored on the blockchain is secure and to catch the right information.
To effectively operate as a blockchain network, the network must have a way to reach that consensus—an agreement among all participants that transactions are valid and the order in which they should appear on the blockchain.
This consensus process is necessary for making sure that all nodes on the ledger agree on what’s happening and ensuring that nobody attempts to fraudulently double spend or perform other malicious activities.
Consensus Mechanisms in Blockchain Types
There are many blockchain consensus mechanisms, and each algorithm has its unique advantages, disadvantages, and trade-offs.
Let’s take a look at some of the most commonly used consensus mechanisms that make the network safe from tampering.
1. Proof of Work (PoW)
The first consistency mechanism used by Bitcoin in 2008 was Proof of Work (PoW). A way in which we design the blockchain is such that participants (miners) can only add new blocks to the blockchain once they expend a good amount of computing effort.
A cryptographic puzzle has to be solved by miners, which requires lots of computational resources. If the puzzle is solved, the right to put the next block in the blockchain and to be paid a reward of new cryptocurrency (block reward) belongs to the first miner.
PoW ensures network integrity in several ways:
- Security Against Sybil Attacks: With PoW it is prohibitively expensive for any one actor to take control of the majority of the network (51% attack). As the costs of attacking a network are apportioned against miners whose investment in computational power (energy) drives the cost of attack up, the costs increase to excess.
- Irreversible Transactions: Once the data of a block has been added to the blockchain, it cannot be changed anymore, so simply the block gets re-mined, which becomes a costly expense.
- Decentralization: Since PoW distributes the control over the network, anybody with computational power requires some resources from him to participate in the mining process.
One of the drawbacks to PoW is high energy consumption and slow transaction processing speed, but both of these issues have contributed to the increased development of alternative consensus mechanisms.
2. Proof of Stake (POS)
Proof of Stake (POS), a possible alternative to PoW, tries to settle the inefficiencies of Proof of Work (PoW). In POS validators (also known as “stakers”), they are chosen to create new blocks and validate transactions based on how much cryptocurrency they locked up as collateral (staked).
Being chosen to create a block and earn rewards increases with the amount of cryptocurrency a validator holds and how much of it they are willing to lock up.
Having POS ensures network integrity.
POS ensures network integrity through several features:
- Lower Energy Consumption: POS eliminates the computational work, which overall consumes high energy. POS is, therefore, more environmentally friendly.
- The incentive to act honestly: The staked coins of those who behave dishonestly can be lost, a process called ‘slashing,’ since validators can be punished and be fined even with Ethereum that is being tested at the moment. It is this financial penalty that serves to incentivize validators to protect the integrity of the network.
- Security: There is a big financial barrier for an attacker to eliminate the network; someone would have to control more than 51% of the staked cryptocurrency. Staked coins are also at risk of getting slashed if the attacker is caught, besides the pain of being ‘fried.
- Decentralization: Just like PoW, PoS offers the decentralization of the network as well; anyone can join the validation process by staking their coins.
POS, however, has its drawbacks, such as the high probability of the “rich get richer” phenomenon, where validators with an advantage in the numerical value of their stake will be more likely to be chosen and end up being the centralization in time.
3. Delegated Proof of Stake (Duos), otherwise known as Delegated Proof of Stake (Duos)
Delegated Proof of Stake (Duos) is “a” variation on POS that adds an extra layer of delegation to the consensus process.
On the Duos side, coin holders elect a small set of delegates, also referred to as witnesses, who are tasked with validating transactions and producing blocks on the network’s behalf.
This centralization is also brought about by the voting process, which makes consensus more efficient, but at the same time, it is more centralized.
Duos Honourable Storage is How It Ensures Network Integrity
- Voting Power: Token holders are incentivized to become involved in the governance of the chain by voting for delegates trusted to represent their interests. By allowing the community to vote out bad actors, this voting system makes the network more democratic.
- Efficiency and Scalability: Duos dilutes the number of potential participants and reduces the number of individuals potentially involved in the process, reducing the number of people necessary to complete consensus and increasing time. This increases network scalability.
- Security: Just like POS, validators stand to lose their staked coins if they aren’t playing nice. Another aspect is the relatively small number of delegates it can have, which makes tracking and enforcing delegates’ work much easier for the network.
Despite this, the centralization concern concerning a small band of delegates potentially wielding too much control over the network has returned to rise.
4. Practical Byzantine Fault Tolerance (PBFT) is an abbreviation
The consensus mechanism, Practical Byzantine Fault Tolerance (PBFT), is a technique used to solve the challenges of bringing nodes in a distributed system to a consensus in the presence of faulty or malicious participating nodes.
Originally developed for systems with up to one-third of the participants being arbitrary or malicious (Byzantine faults), this account requires no changes to the design fundamentals. Hyperledger Fabric, Tendermint, etc. all use PBFT.
The Structure of PBFT for Ensuring Network Integrity
- Fault Tolerance: PBFT is that it can tolerate one-third of the network becoming malicious or faulty. As a result, it lets the network continue even in the presence of adversarial actors.
- Efficient Consensus: PBFT is not mined nor staked and hence consumes less energy than PoW and POS. “A series of rounds ensures the nodes are in agreement about the next block, which is more resource efficient.”
5. Proof of Authority (POA)
Proof of Authority (POA) is one of the consensus algorithms in which authorities are expected to generate new blocks.
It is frequently applied to the private or permissioned system where the nodes are distinguishable and confidence is established before the event.
This article aims to show how POA guarantees network integrity.
- Centralized Trust: In POA, there is a list of trusted validators—this implies that the integrity of a network depends on the validator’s reputation and identity. This makes it appropriate in enterprise blockchains where the actors are well understood.
- Scalability: POA networks are even faster than PoW or POS networks because only a few validators are employed and there is minimal computation.
- Efficient and Secure: POA is likely less susceptible to such an attack since the few authorities considered trustworthy would be professionally embarrassed by their actions in launching malicious ones.
Nevertheless, POA is more centralized than other mechanisms and does not fit well with the open public blockchains where participants are not trusted.
In this segment, the author’s focus is on consensus mechanisms and their impact on the integrity of the blockchain network.
Therefore, network integrity is crucial for safe, reliable, and robust blockchain networks. Consensus mechanisms are the ways by which people of decentralized networks share the state of the blockchain, and the latter contains provisions against fraud, double spending, and other malicious activity.
- Prevention of Double-Spending: For instance, consensus mechanisms guarantee that only authentic transactions are captured on the blockchain, eliminating situations where one user can use the same ‘coins’ more than once. This is particularly relevant in cryptocurrency decentralized networks where assets are the main items of value in circulation.
- Security and Fault Tolerance: Irresponsible actors’ heeds are guarded against using consensus mechanisms that protect the blockchain. They also guarantee that the network can smoothly continue operation even in the condition of having damaged nodes.
- Decentralisation and Trust: To fully dispense with a central authority, blockchain depends on consensus mechanisms that nullify the need for a central body. That ensures that trust is diffused all across the network and no one entity holds control over the ledger.
Conclusion
Secondly, blockchain consensus mechanisms are what make blockchain technology secure and reliable. The job of keeping the network safe from fraud (integrity), preventing centralization, and creating trust between participants is what they are doing.
Regardless of each consensus algorithm (Proof of Work, Proof of Stake, etc.), they all accomplish the important task of making sure that the blockchain is an insecure, transparent, immutable ledger.
With blockchain technology advancing, new consensus mechanisms and refinements on existing protocols will be developed to generate a more scalable, energy-efficient, and highly decentralized chain.
One thing that will ultimately remain central to the success and adoption of blockchain systems in a wide range of industries is the role of consensus mechanisms in maintaining network integrity.