Consensus Algorithm-a complete List/comparation (Pros&Cos) of all Consensus Algorithms 11 to 15 (Total of 30).
11. Proof of Stake Velocity
Used by: Reddcoin
Explanation: Proof of Stake Velocity (PoSV) is proposed as an alternative to Proof of Work (PoW) and Proof of Stake (PoS) to secure the peer-to-peer network and confirm transactions of Reddcoin, a cryptocurrency created specifically to facilitate social interactions in the digital age. PoSV is designed to encourage both ownership (Stake) and activity (Velocity) which directly correspond to the two main functions of Reddcoin as a real currency: store of value and medium of exchange. Reddcoin can also function as the unit of account in heterogeneous social context.
Detailed description can be found in Further Reading.
12. Proof of Importance
Better than PoS in evaluating stake.
Used by: NEM
Explanation: NEM’s consensus network depends not only the number of coins but on the possibility that productive system action ought to be remunerated. The chances of staking a block are a component of various factors, including notoriety (controlled by a different purpose-designed framework), balance, and the number of transactions made to and from that position. This is termed as importance calculation. This gives a more all-encompassing image of a ‘helpful’ system member.
In order to be eligible for the importance calculation, users need to have at least 10,000 XEM in their balance. Considering there are just under 9 billion XEM in circulation, achieving that goal is not overly expensive by any means. It is possible this threshold of 10,000 XEM is changed in the future, but for now, it is still the same. But the importance calculation is done utilizing a specific algorithm, not just by probability and size of their shares.
It is also important to note NEM’s proof-of-importance is resistant to arbitrary manipulation. Sybil attacks and loop attacks are mitigated using the underlying mechanisms of the consensus. It is equally important to remember proof of importance is not proof of stake, although it is easy to draw parallels between the two.
13. Proof of Burn
Used by: Slimcoin, TGCoin (Third Generation Coin)
Explanation: With proof of burn, instead of pouring money into expensive computer equipment, you ‘burn’ coins by sending them to an address where they are irretrievable. By committing your coins to never-never land, you earn a lifetime privilege to mine on the system based on a random selection process.
Depending on how proof of burn is implemented, miners may burn the native currency or the currency of an alternative chain, like bitcoin. The more coins you burn, the better chance you have of being selected to mine the next block.
Over time, your stake in the system decays, so eventually you will want to burn more coins to increase your odds of being selected in the lottery. (This mimics bitcoin’s mining process, where you have to continually invest in more modern computing equipment to maintain hashing power.)
While proof of burn is an interesting alternative to proof of work, the protocol still wastes resources needlessly. Another criticism is that mining power simply goes to those who are willing to burn more money.
14. Proof of Identity
Explanation: Proof of Identity (PoI) is a cryptographic evidence (piece of data) which tells that any user knows a private key that compares to an authorized identity and cryptographically attached to a specific transaction. Every individual from some group can create a PoF (only a block of data) and present it to anyone for instance to the processing node.
15. Proof Of Activity
Used by: Decred
Explanation: To avoid hyperinflation (what happens when too much of a currency floods the system) bitcoin will only ever produce 21m bitcoins. That means, at some point, the bitcoin block reward subsidy will end and bitcoin miners will only receive transaction fees.
Some have speculated this might cause security issues resulting from a ‘tragedy of the commons’, where people act in self-interest and spoil the system. So, proof of activity was created as an alternative incentive structure for bitcoin. Proof of activity is a hybrid approach that combines both proof of work and proof of stake.
In proof of activity, mining kicks off in a traditional proof-of-work fashion, with miners racing to solve a cryptographic puzzle. Depending on the implementation, blocks mined do not contain any transactions (they are more like templates), so the winning block will only contain a header and the miner’s reward address.
At this point, the system switches to proof of stake. Based on information in the header, a random group of validators is chosen to sign the new block. The more coins in the system a validator owns, the more likely he or she is to be chosen. The template becomes a full-fledged block as soon as all of the validators sign it.
If some of the selected validators are not available to complete the block, then the next winning block is selected, a new group of validators is chosen, and so on, until a block receives the correct amount of signatures. Fees are split between the miner and the validators who signed off on the block.
Criticisms of proof of activity are the same as for both proof of work (too much energy is required to mine blocks) and proof of stake (there is nothing to determine a validator from double signing).