Selecting desired consensus protocols is crucial as it directly influences the cornerstones of cryptocurrency projects: safety performance, scalability, energy expenses, decentralization, and much more. Thus its selection requires comprehensive study, the pros and cons of each option, and a solid understanding of the needs and goals of your crypto project. Let’s take a look at consensus mechanisms and find the perfect choice for your crypto ideas.
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What is Consensus Mechanism?
In simple terms, a consensus mechanism in blockchain is a series of regulations and procedures that every node in the blockchain ecosystem must follow. It’s designed to confirm and submit new operations to the blockchain, ensuring the network is correctly regulated without relying on a central authority.
Types of Blockchain Consensus Mechanisms
It goes without saying that Proof of Work and Proof of Stake are the most popular types of consensus mechanisms. They are on everybody’s lips, especially during the transition of Ethereum from PoW to PoS. Every crypto enthusiast became a master in this field, arguing about which one is the best consensus algorithm in Twitter threads. However, did you know that besides these two titans of consensus mechanisms, there are nine more? We’ll show you all types of consensus mechanisms in blockchain so you’ll be ahead of the game.
Delegated Proof of Stake
Delegated Proof of Stake (DPoS) is an upgraded mechanism built on top of PoS. In DPoS, token holders can delegate voting rights to the selected individuals to confirm transactions on their behalf. These delegators take turns in producing blocks. Among the main advantages of this mechanism are scalability, quick block creation, and minimal hardware for participation. However, there are also downsides. DPoS carries a high risk of centralization as small stakeholders have limited voting power.
Proof of Authority
Proof of Authority consensus or Proof of Reputation is a modified version of PoS. It relies on identity disclosure and reputation for validation, eliminating the need for staking. The revelation of identities makes detecting suspicious activity within the network easier. New validators are elected and approved by authorized nodes through voting. However, it’s important to note that despite the advantages, such as fast speed and eco-friendly transactions, the question of centralization still arises.
Proof of History
Proof of History (PoH) adds timestamps directly into the blockchain to ensure the consistency and reliability of transactions, enabling fast and cost-effective transactions. However, PoH has some downsides: harsh hardware requirements, decentralization issues, and large amounts of data per transaction.
Proof of Space and Time
Proof of Space & Time relies on the availability of storage space on a miner’s hard drive to perform actions within the network. However, unlike Proof of Capacity (PoC), the availability is limited in time. The more storage space a miner has available, the more data their hard drive can store and provide valid solutions. However, PoST has a significant drawback – this mechanism is relatively new and hasn’t been properly tested, which creates significant security loopholes.
Proof of Importance
Proof of Importance (PoI) is a progressive version of PoS that assesses the node’s impact on the network. Unlike PoS, which solely considers the number of coins owned, PoI also takes into account the quantity of vested money, the volume of transactions, and participation in activity clusters. Active participation in the network is crucial for PoI.
Proof of Burn
Iain Stewart created Proof of Burn consensus as an enhanced and environmental-friendly version of PoW. As the title suggests, the network’s valid state is achieved by burning coins. PoB is viewed as a more environmentally friendly alternative to traditional mining. The shortcoming is that the mechanism relies on burning coins created through PoW, which consumes a significant amount of energy.
Proof of Elapsed Time
Proof of Elapsed Time (PoET) was created by Intel and is centered on randomly choosing participants as the following validator with a probability based on their waiting time to add the next node to the blockchain. Moreover, to enhance security PoET requires identification for participants. It’s also claimed to be a sustainable and fair process of choosing the winner. However, there are some disturbing facts: no crypto project currently uses PoET, and it entirely relies on Intel technology.
Proof of Activity
Proof of Activity is a mixed consensus algorithm combining the best features of PoW and PoS. In general, PoA attempts to balance block generation efficiency and security. It uses a minting process from PoW, while the validation process goes through PoS standards. Both sides receive transactional fees for their work.
Practical Byzantine Fault Tolerance
Distributed systems can achieve consensus despite the malicious behavior of specific nodes by dint of the pBFT method, designed to handle Byzantine faults. There are primary and secondary nodes. Initially, the request is sent to the primary node. To avoid failures, the lead node reaches a consensus, which is accepted by the majority of nodes. While pBFT consensus is renowned for its speed and rewarding nature to the participating nodes, some concerns about centralization and scalability exist.
Evaluating Blockchain Consensus Mechanism for Your Project
Various consensus mechanisms maintain the accuracy and authenticity of records by achieving agreement through different strategies. Now that you are familiar with various types of blockchain consensus mechanisms, it is crucial to carefully assess each option’s advantages and disadvantages based on your crypto project’s specific needs. Factors such as the degree of decentralization, scalability opportunities, performance, security issues, and energy consumption all depend on the mechanism’s choice to ensure your venture’s long-term success. Choose wisely!