Consensus Algorithm-a complete List/comparation (Pros & Cos) of all Consensus Algorithm 1-5(total of 30).
Consensus algorithms are the basis of all the blockchains/DAGs. They are the most important part of the blockchain/DAG platforms.
Without them(consensus algorithms) we will be left with just a dumb, immutable database.
Here we list all the major consensus algorithms and will evaluate their pros and cons.
Here is a list of 5 consensus algorithms.
1. Proof of Work
Proof of Work
It has been tested in the wild since 2009 and stands steady today as well.
Uses up a lot of energy, not good for environment.
Is susceptible economy of scale.
Used by: Bitcoin, Ethereum, Litecoin, Dogecoin etc.
Type: Competitive consensus.
Explanation: It is the first consensus algorithm (proposed by Satoshi Nakamoto introduced in is article) to create distributed trustless consensus and solves the double-spend problem. POW is not a new idea, but the way Satoshi combined this and other existing concepts — cryptographic signatures, merkle chains, and P2P networks — into a viable distributed consensus system, of which cryptocurrency is the first and basic application, was quite innovative.
The way it works that the participants of the blockchain(called miners) have to solve a complex but useless computational problem in order to add a block of transactions into the blockchain.
Basically, it is done to ensure that the miners are putting some money/resources (mining machines) to do the work, which shows that they won’t harm the blockchain system, cause harming the system will result in losing their investment; thus harming themselves.
The difficulty of the problem can be changed in runtime, to ensure the constant block time. Sometimes there is a situation in which more than one miners solve the problem simultaneously. In that case, miners choose one of the chains and the longest chain is considered the winner. So assuming most miners are working on the same chain, that one will grow fastest will be the longest and most trustworthy. Hence Bitcoin is safe as long as more than 50% of the work being put in by miners is honest.
2. Proof of Stake
More expensive to attack for attackers.
Not susceptible to economies of scale.
Used by: Ethereum(soon), Peercoin, Nxt
Type: Competitive consensus.
Explanation: The proof of stake was created as an alternative to the proof of work (PoW), to tackle inherent issues in the latter. Here instead of using mining, you have to have some stake(coins) in the system. So, if you own 10% of the stake(coins), then your probability of mining next block will be 10%.
Mining requires a great deal of computing power to run different cryptographic calculations to unlock the computational challenges. The computing power translates into a high amount of electricity and power needed for the proof of work. In 2015, it was estimated that one Bitcoin transaction required the amount of electricity needed to power up 1.57 American households per day. So, in order to save the power wastage PoS was introduced.
In PoS, a dollar is a dollar. For example, consider 10,000 miners, each spend $1/min ($87.6M/yr) may have less hashing power than one mining pool that spends $10,000/min (despite also spending $87.6M/yr). But in case of PoS, you can’t use it up all at once. Here a dollar is a dollar. Thus, it is not susceptible to economies of scale.
Also, attacking a PoS system is more expensive than attacking a PoW system.
the cost profile of a repeated 51% attack in PoS is as if “your ASIC farm burned down” with each additional round.
your ASIC farm burned down
This means that you lose your stake every time you do an attack on a PoS system, whereas in PoW you don’t lose your mining equipment or your coins if you attack the system; instead you just make it(attacking a PoW system) hard to execute.
But one issue that can arise is the “nothing-at-stake” problem, wherein block generators have nothing to lose by voting for multiple blockchain histories(forks), thereby preventing consensus, from being achieved.
In PoS you can stake your assets on both sides of the chain(“nothing-at-stake” problem) whereas in PoW you can’t mine on both the sides(as it is too hard).
Because unlike in proof-of-work systems(where you have to do a lot of computation to extend a chain), there is little cost to working on several chains. Many projects have tried to solve this problem in different ways(mentioned in further reading). For eg. as stated above, one of the solution is to punish the bad validators.
3. Delayed Proof-of-Work
can add value to other blockchains by indirectly providing Bitcoin(or any secure chain) security without paying the cost of Bitcoin(or any secure chain) transactions
Only blockchains using PoW or PoS can be a part of this consensus.
Under “Notaries Active” mode the hashrate for different nodes(notary and normal nodes) have to be calibrated, otherwise, the difference between the hashrates can explode(see below for more explanation)
Used by: Komodo
Type: Collaborative consensus
Explanation: Delayed Proof of Work (dPoW) is a hybrid consensus method that allows one blockchain to take advantage of the security provided through the hashing power of a secondary blockchain. This is achieved through a group of notary nodes that add data from the first blockchain onto the second, which would then require both blockchains to be compromised to undermine the security of the first. The first to make use of this consensus method is Komodo, which is attached to the Bitcoin blockchain.
The blockchain relying on dPoW can make use of either the Proof of Work (PoW) or Proof of Stake (PoS) consensus methods to function; and it can attach itself to any PoW blockchain desired. However, Bitcoin’s hash rate currently provides the greatest level of security to blockchains being secured by dPoW. The illustration below shows the relationship of individual records to the primary blockchain and its attached PoW blockchain:
There are two types of nodes within a dPoW system: notary nodes and normal nodes. The 64 notary nodes are elected by dPoW blockchain stakeholders to add (notarize) confirmed blocks from the dPoW blockchain onto the attached PoW blockchain. Once a block has been completed, its hash is added to a Bitcoin transaction signed by 33 of the notary nodes, creating a record of dPoW block hashes on the Bitcoin blockchain that have been notarized by a majority of the network’s notary nodes.
To prevent mining wars between notary nodes, which would reduce the network’s efficiency, Komodo has devised a round-robin method of mining that operates on two modes. The “No Notary” mode allows for all network nodes to mine blocks, similar to a traditional PoW consensus mechanism; however, under “Notaries Active” mode, the network notaries will mine at a significantly reduced network difficulty rate. Within this scheme, each notary is allowed to mine one block at its current difficulty rate, while the other notary nodes must mine at 10 time higher and all the normal nodes will always mine at 100 times the difficulty rate of the notary nodes.
But this causes some problems. As mentioned in one of my conversations with founder of Komodo it can lead to high differences between the hashrate of notary miners and the normal miners :
The dPoW system is designed to allow the blockchain to continue functioning without the notary nodes. In such a situation, the dPoW blockchain can continue operating based upon its initial consensus method; however, it would no longer have the added security of the attached blockchain.
Delayed Proof of Work, then, allows for increased security and reduced energy usage for any blockchain making use of this consensus method. For example, as Komodo uses the Equihash hashing algorithm to prevent mining with ASICs and it relies upon a round-robin method of mining for notary nodes, incentives are structured to reduce the possibility that competition between nodes will lead to excessive use of energy or computing power.
In addition, a dPoW blockchain such as Komodo can add value to other blockchains by indirectly providing Bitcoin security without paying the cost of Bitcoin transactions: A third blockchain using dPoW can attach itself to Komodo, which is subsequently attached to Bitcoin. In this way, dPoW blockchains can benefit from Bitcoin’s high hash rate without having to be directly attached to the Bitcoin blockchain.
Finally, the separated functions of notary nodes and normal nodes within the system ensure that the initial consensus mechanism continues to operate in the event that the notary nodes fail. This interdependence creates an incentive for other networks to support the continued maintenance of the Bitcoin network without becoming entirely reliant upon its direct functionality.
4. Delegated Proof-of-Stake
Fast. Steemit, a high traffic blogging site uses it. EOS has a block-time of 0.5 sec.
A bit centralized.
Participants with high stakes can vote themselves in to become a validator. Something which is seen recently in EOS.
Used by: Bitshares,Qredit,Ark,List,Steemit
Type: Collaborative consensus
Explanation: In DPoS, the stake holders in the system can elect leaders(witnesses) who will vote in their behalf. This makes it faster than the normal PoS.
For eg. in case of EOS, 21 witnesses get elected at a time and a pool of nodes(potential witnesses) are kept at standby so that if someone of the witness nodes dies or does some malicious activity, then it could be replaced by a new node immediately. The witnesses are paid a fee for producing blocks. The fee is set by the stake holders.
Usually all the nodes produce blocks one at a time in a round-robin fashion. This prevents a node from publishing consecutive blocks, preventing him to execute double-spending attacks. If a witness does not produce a block in their time slot, then that time slot is skipped, and the next witness produces the next block. If a witness continually misses his blocks or publishes invalid transactions then the stakers vote him out and replace him with a better witness.
In DPoS, miners can collaborate to make blocks instead of competing like in PoW and PoS. By partially centralizing the creation of blocks, DPoS is able to run orders of magnitude faster than most other consensus Algorithm EOS (with uses DPoS)the first Blockchain to achieve a block time in 0.5 seconds...it’s fast.
Proof of Authority
A bit centralized. Can be used in public blockhains but usually used in private, permissioned blockchains.
Used by: POA, Ethereum, vechain...
Type: Collaborative consensus
Explanation: In PoA-based networks, transactions and blocks are validated by approved accounts, known as validators. Validators run software allowing them to put transactions in blocks. The process is automated and does not require validators to be constantly monitoring their computers. It, however, does require maintaining the computer (the authority node) uncompromised.
The three main conditions that must be fulfilled for a validator to be established are:
Identity must be formally verified on-chain, with a possibility to cross-check the information in a publicly available domain
Eligibility must be difficult to obtain, to make the right to validate the blocks earned and valued. (Example: potential validators are required to obtain public notary license)
There must be complete uniformity in the checks and procedures for establishing an authority
With PoA individuals earn the right to become validators, so there is an incentive to retain the position that they have gained. By attaching a reputation to identity, validators are incentivized to uphold the transaction process, as they do not wish to have their identities attached to a negative reputation, thus losing the hard-earned validator role.
This topic was modified 5 months ago 2 times by alberdioni8406