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What is a blockchain consensus mechanism

    In computer science, a consensus mechanism is a process that allows distributed systems or processes to reach agreement on a single data value. A fundamental problem of distributed computing and multi-agent systems is ensuring the overall reliability of the system even in the presence of faulty processes. For this reason, it is often necessary for processes to coordinate to reach a consensus, that is, to agree on a data value needed during the calculation. For example, a consensus mechanism can be used to agree which transactionsTransaction Exchange of value, property, or data between two parties. to record in a databaseDatabase A set of data stored in a structured way., or to synchronize the clocks of different systems.

    Types of consensus mechanism

    Since the first Bitcoin blockchain was developed in 2008, this type of technology has developed significantly and continues to evolve every day. Almost every year the number of cryptocurrencies in circulation doubles (even if many fall into disuse) and new blockchains are created along with them. Some blockchains adopt established consensus mechanisms while others develop new ones. The panorama of consensus algorithms is therefore quite vast. Some consensus mechanisms based on alternative technologies, such as Directed Acyclic Graph (DAG) and Classical consensus, are emerging as promising alternatives to PoW and PoS. These mechanisms offer advantages in terms of scalability and energy efficiency, but still need to be further developed and tested. The choice of the most suitable consensus mechanism depends on the specific needs of the blockchain. Public blockchains like Bitcoin and Ethereum use PoW to ensure networkNetwork The set of computers connected to each other, called nodes, on which the blockchain of a specific cryptocurrency is based. security and decentralization. Private or permissioned blockchains, often used by companies, can use PoA, DPoS or BFT to offer greater scalability and security. To date, numerous consensus algorithms exist. We can classify the most important and widespread ones into five categories:

    • Majority consensus algorithms: Majority consensus algorithms are a type of consensus algorithmAlgorithm A procedure applied to solve a given problem. that uses a majority vote to reach an agreement. These algorithms are among the simplest and most widely used, and are used in a variety of applications, including blockchains, computer networksNetwork The set of computers connected to each other, called nodes, on which the blockchain of a specific cryptocurrency is based., and voting systems
    • Authority consensus algorithms: Authority consensus algorithms are a type of consensus algorithm that relies on a group of trusted authorities to reach an agreement. These authorities are responsible for validating transactions and ensuring the integrity of the blockchain. Authority consensus algorithms are often used in permissioned blockchains, where access to the network is restricted to authorized participants.
    • Leader consensus algorithms: Leader consensus algorithms are a type of consensus algorithm that elects a leader nodeNode Device connected to a blockchain, which makes up the network. to approve transactions. The leader node is responsible for proposing new blocksBlock A set of encrypted transactions that, in sequence with other blocks, constitutes a blockchain. and ensuring that they are valid. Once a blockBlock A set of encrypted transactions that, in sequence with other blocks, constitutes a blockchain. has been approved by the leader node, it is broadcast to the other nodesNode Device connected to a blockchain, which makes up the network. in the network. Leader consensus algorithms are often used in Proof-of-Stake (PoS) blockchains, where nodes are randomly selected to be leaders.
    • Client consensus algorithms: Client consensus algorithms are a type of consensus algorithm that distributes the responsibility for reaching an agreement among all of the nodes in the network. Each node in the network independently validates transactions and sends its votes to a central server. The central server then aggregates the votes and determines which transactions are valid. Client consensus algorithms are often used in Proof-of-Work (PoW) blockchains, where nodes must solve complex mathematical puzzles to be eligible to vote.
    • Hybrid consensus algorithms: Hybrid consensus algorithms combine different mechanisms, such as PoW, PoS, or DPoS, to ensure agreement among authorized participants while considering inputs from the public users.

    Now let’s see all the consensus mechanisms. Please notice that Proof of Work (PoW), Proof of Stake (PoS), Delegated Proof of Stake (DPoS), and Federated Byzantine Agreement (FBA) are the most used consensus mechanism. All the other consensus mechanisms – flagged with an asterisk – are experimental or have limited adoption.

    Majority consensus algorithms
    • Byzantine Fault Tolerance (BFT) is a category of consensus mechanisms that ensures the network can continue to operate even if some nodes are offline or malicious. This is done by having a majority of nodes agree on the state of the blockchain. BFT algorithms are used by some public and private blockchains.
    • Correct by Construction Casper (CBC) is a consensus mechanism designed to be more efficient and scalable than Proof of Work (PoW). CBC uses a system of validators that vote on the approval of blocks. Validators are selected based on their stake, which is the amount of cryptocurrency they have locked up on the blockchain. (*)
    • Delegated Byzantine Fault Tolerance (dBFT) is another evolution of BFT that reduces the number of nodes required to reach consensus. dBFT is used by some public and private blockchains. (*)
    • Energy-efficient Proof of Work (ePoW) is a variation of Proof of Work that uses less energy. (*)
    • Friendly Finality Gadget (FFG) is a mechanism that is used to make it more difficult to create forks in the blockchain. FFG uses a system of checkpoints, which are points of control that are established periodically. Blocks that occur after a checkpoint are considered final and cannot be modified anymore. (*)
    • Practical Byzantine Fault Tolerance (pBFT) is an evolution of BFT that is more efficient and scalable. pBFT is used by some public and private blockchains. (*)
    • Proof of Work (PoW) is the most common consensus mechanism. It requires nodes to solve a complex mathematical problem to verify transactions. PoW is very secure and decentralized, but it is also very energy intensive. PoW is used by blockchains like Bitcoin, Dogecoin and Litecoin.
    • Proof of Stake (PoS) is an alternative consensus mechanism to PoW. It requires nodes to stake a certain amount of cryptocurrency to verify transactions. This process is less energy-intensive than PoW, but it is more centralized. PoS is used by blockchains like Ethereum, Cardano and Tezos.
    • Proof of Elapsed Time (PoET) is a consensus mechanism that is based on the amount of time it takes to solve a mathematical problem. Nodes that solve the problem quickly are more likely to be selected to verify transactions. PoET is used by blockchains like Hyperledger Fabric and Hedera Hashgraph. (*)
    Authority consensus algorithms
    • Ethereum Proof of Authority is a consensus mechanism that allows validators to be chosen based on their reputation. (*)
    • Proof of Authority (PoA) is another hybrid consensus mechanism. It requires nodes to have a certain amount of authority to verify transactions. This authority can be based on factors such as reputation or identity. PoA is used by blockchains like VeChain, Dfinity and Elrond. (*)
    • Liquidd Proof of Stake (LPoS) is a consensus mechanism that combines elements of Proof of Stake (PoS) and Proof of Authority (PoA). In LPoS, nodes can lease their cryptocurrency to other nodes, who then have the right to validate transactions and earn rewards. This can help to decentralize the network and reduce the risk of centralization. (*)
    • High Interest Proof of Stake (HiPoS) is a variant of PoS that offers higher rewards for validators. This can attract more nodes to the network and increase its security. However, it can also lead to centralization, as nodes with more cryptocurrency will be able to earn more rewards. (*)
    • Magi’s Proof of Stake (mPoS) is a more efficient and scalable variant of PoS. It uses a system of delegated validators, which are nodes that are elected by the community to validate transactions. This can help to reduce the computational requirements of PoS and make it more suitable for use on larger blockchains. (*)
    • Nexus Proof of Holding (nPOH) is a PoS mechanism that is based on the amount of cryptocurrency that a node holds. Nodes with more cryptocurrency have a greater chance of being selected to validate transactions. This can help to incentivize nodes to hold more cryptocurrency and make the network more secure. (*)
    • Nexus Proof of State (nPoS) is a PoS mechanism that is based on the history of a node’s transactions. Nodes with a longer history of transactions are more likely to be selected to validate transactions. This can help to incentivize nodes to engage in more activity on the network and make it more secure. (*)
    • Delegated Proof of Stake (DPoS) is a variation of PoS. It allows token holders to delegate their voting power to other trusted nodes. This can make the network more scalable and efficient. DPoS is used by blockchains like EOS, Ark and Tron.
    • Proof of Weight (PoW) is a consensus mechanism that combines elements of PoS and PoW. Nodes that hold more cryptocurrency have more weight in voting. PoW is used by blockchains such as EOS and Tron. (*)
    • Proof of Identity (PoI) is a consensus mechanism that is based on the identity of a node. Nodes that have a more established identity are more likely to be selected to verify transactions. PoI is not yet widely used, but it is a promising technology for making blockchains more secure and transparent. (*)
    • Proof of Importance (PoI) is a consensus mechanism based on the relevance of a node within the network. Nodes that contribute more to the network get a higher chance of validating transactions. PoI is used by blockchains such as NANO and Steem. (*)
    • Proof of Jurisdiction (PoJ) is a consensus mechanism that is based on the jurisdiction of a node. Nodes that are located in certain jurisdictions are more likely to be selected to validate transactions. PoJ is not yet widely used, but it has the potential to make blockchains more secure and transparent. (*)
    • Proof of Reputation (PoR) is a consensus mechanism that is based on the reputation of a node. Nodes that have a more positive reputation are more likely to be selected to validate transactions. PoR is not yet widely used, but it has the potential to make blockchains more secure and transparent. (*)
    • Proof of Stake Authority (PoSA) is a consensus mechanism that combines elements of PoS and Proof of Authority (PoA). (*)
    • Proof of Stake History (PoSH) is a consensus mechanism that uses a reputation system to select validators. Validators who validate transactions accurately and timely gain reputation, while validators who validate transactions incorrectly or late lose reputation. Validators with the highest reputation are selected to validate new blocks. (*)
    • Proof of Stake Lottery (PoSL) is a consensus mechanism that uses a lottery to select validators. All token holders have the opportunity to be selected to validate a block. Selected validators are rewarded with transactionTransaction Exchange of value, property, or data between two parties. commissions. (*)
    • Proof of Stake Consensus with Bonus (PoSCB) is a consensus mechanism that rewards validators who validate transactions quickly and efficiently. Validators who validate transactions faster receive a bonus on transaction fees. (*)
    • Proof of Stake Consensus with Penalty (PoSCP) is a consensus mechanism that penalizes validators who do not validate transactions accurately or timely. Validators who fail to validate transactions correctly or late receive a transaction fee penalty. (*)
    • Proof of Space (PoS) is a consensus mechanism based on the amount of storage space a node is willing to dedicate to the blockchain. Nodes that have more storage space are more likely to be selected to validate transactions. PoS is used by blockchains such as Chia and Filecoin. (*)
    • Federated Byzantine Agreement (FBA) is a consensus algorithm that is designed for permissioned blockchains. It is based on a group of trusted nodes that are responsible for proposing and validating new blocks. FBA is used by blockchains such as Hyperledger Fabric and R3 Corda.
    • Tower BFT is a consensus mechanism that is based on the principles of Byzantine Fault Tolerance (BFT). (*)
    Leader consensus algorithms
    • Adaptive Proof of Work (APoS) is a variation of Proof of Stake that adjusts the difficulty of mining blocks based on the number of participants. (*)
    • AssetAsset An economic resource with value that an individual or organization owns, controls, or expects future benefits from. Examples of assets: gold, stocks, cryptocurrencies, etc. PoS (ApoS) is a variation of Proof of Stake that allows users to stake assetsAsset An economic resource with value that an individual or organization owns, controls, or expects future benefits from. Examples of assets: gold, stocks, cryptocurrencies, etc. other than cryptocurrency. (*)
    • Delegated Proof of Contribution (DpoC) is a consensus mechanism that allows token holders to delegate their voting power to a validator. This can make the consensus process more efficient and scalable, but it can also lead to centralization. (*)
    • Delegated Proof of Importance (DPoI) is a consensus mechanism that rewards nodes that contribute to the network. DPoI is more efficient than PoS, but it is also more complex. (*)
    • Directed acyclic graphs (DAG) are an alternative data structure to blockchain. DAGs are not linked in a sequential order, but can be read in any order. DAG consensus mechanisms do not require nodes to solve mathematical problems or have to validate transactions in a specific order. DAGs are used by blockchains such as IOTA and Hedera Hashgraph.
    • Hybrid Proof of Work (HpoW) is a consensus mechanism that combines elements of Proof of Work (PoW) and Proof of Stake (PoS). Nodes must solve mathematical problems to validate blocks, but they must also stake a certain amount of cryptocurrency. This makes HPoW more efficient than PoW, but also more centralized than PoS. (*)
    • Hashgraph is a consensus mechanism that uses a directed acyclic graph (DAG) to validate transactions. DAGs are different from blockchains in that they do not require nodes to solve mathematical problems or validate transactions in a specific order. This makes Hashgraph more efficient and scalable than PoW or PoS. (*)
    • Ouroboros Proof-of-Stake is a consensus mechanism that is based on the principles of stake delegation, cryptographic randomness, and verifiable secret sharing. (*)
    • Proof of Activity (PoA) is a hybrid consensus mechanism that combines elements of PoW and PoS. Nodes mine blocks, but they do not need to solve complex mathematical problems. This makes PoA more energy-efficient than PoW. PoA is used by blockchains like NEO and Ontology. (*)
    • Proof of Elapsed Time (PoET) is a consensus mechanism that rewards nodes based on the amount of time they have been online. (*)
    • Proof of History (PoH) is a consensus mechanism that records the order in which events occur. (*)
    • Proof of Signature (PoSign) is a consensus mechanism that validates signatures on transactions. (*)
    • Proof of Stake Boo (PoS Boo) is a variation of Proof of Stake that uses an asynchronous consensus mechanism. (*)
    • Proof of Stake Casper (PoS Casper) is a variation of Proof of Stake that aims to address the security vulnerabilities of Casper CBC. (*)
    • Proof of StakeTime (PoST) is a variation of Proof of Stake that weights stake based on the amount of staked cryptocurrency and the time it has been staked. (*)
    • Proof of Stake Velocity (PoSV) is a variation of Proof of Stake that rewards nodes based on the velocity of their transactions. (*)
    • Proof of Time (PoT) is a consensus mechanism that selects nodes to validate transactions based on the amount of time they have been online. This makes PoT more efficient than PoW, but it can also lead to centralization. (*)
    • Tangle 2.0 is another consensus mechanism that uses a DAG structure to validate transactions. A DAG structure is also used by other distributed ledger technologies (DLTs) such as Hashgraph. While both – Tangle 2.0 and Hashgraph – use a DAG structure, Tangle 2.0 introduces the concept of ‘Mana’ for network utilization, a resource used to incentivize participation (a feature not present in Hashgraph). (*)
    • Raft is a consensus algorithm designed for efficiency and scalability. It utilizes a leader-follower model, where a designated leader proposes new blocks and coordinates the validation process among follower nodes. Raft is used in some implementations of Hyperledger Fabric and blockchains like Quorum. (*)
    Client consensus algorithms
    • Classical consensus is a consensus method that uses a voting process to reach agreement. The nodes in the network vote for a proposal and the proposal with the highest number of votes is accepted. Classical consensus is used by blockchains such as Hyperledger Fabric and Corda. (*)
    • Paxos is a consensus algorithm that is considered to be one of the most robust and reliable algorithms available. It is based on a series of message exchanges between nodes in the network, which allows them to reach agreement on the state of the blockchain. (*)
    • Proof of Asset is a consensus mechanism that rewards nodes based on the value of the assets they hold. (*)
    • Proof of Bandwidth is a consensus mechanism that rewards nodes based on their bandwidth usage. (*)
    • Proof of Bank Account (PoBA) is a consensus mechanism that rewards nodes based on their bank account balances. (*)
    • Proof of Believability is a consensus mechanism that rewards nodes based on their reputation. (*)
    • Proof of Brain (PoB) is a consensus mechanism that rewards nodes based on their intellectual contribution. (*)
    • Proof of Burn (PoB) is a consensus mechanism based on the amount of cryptocurrency a node is willing to destroy to validate transactions. Nodes that burn more cryptocurrency are more likely to be selected to validate transactions. PoB is used by blockchains such as Peercoin and Namecoin. (*)
    • Proof of Capacity (PoC) is a consensus mechanism that is based on the amount of data that a node can store on the blockchain. Nodes that store more data are more likely to be selected to verify transactions. PoC is used by blockchains like Burst and Chia. See also Proof of Space. (*)
    • Proof of Care (PoC) is a consensus mechanism that rewards nodes based on their commitment to social responsibility. (*)
    • Proof of Contribution is a consensus mechanism that rewards nodes based on their contribution to the network. (*)
    • Proof of Coverage is a consensus mechanism that rewards nodes based on their ability to provide data coverage. (*)
    • Proof of Devotion is a consensus mechanism that rewards nodes based on their loyalty to a particular blockchain. (*)
    • Proof of Disintegration (PoD) is a consensus mechanism that rewards nodes based on their ability to break down data into smaller pieces. (*)
    • Proof of Edit Distance is a consensus mechanism that rewards nodes based on their ability to correct errors in data. (*)
    • Proof of Existence is a consensus mechanism that proves that a particular piece of data exists. (*)
    • Proof of Identity (PoI) is a consensus mechanism that verifies the identity of a particular user. (*)
    • Proof of Importance (PoI) is a consensus mechanism that rewards nodes based on their importance to the network. (*)
    • Proof of Location (PoL) is a consensus mechanism that proves that a particular user is in a specific location. (*)
    • Proof of Meaningful Work (PoMW) is a consensus mechanism that rewards nodes based on their ability to do meaningful work. (*)
    • Proof of Ownership is a consensus mechanism that proves that a particular user owns a particular asset. (*)
    • Proof of Participation (PoP) is a consensus mechanism that rewards nodes based on their participation in a particular activity. (*)
    • Proof of Physical Address (PoPA) is a consensus mechanism that proves that a particular user has a physical address. (*)
    • Proof of Presence (PoP) is a consensus mechanism that proves that a particular user is present in a particular location. (*)
    • Proof of Process is a consensus mechanism that verifies the execution of a particular process. (*)
    • Proof of Processed Payments (PoPP) is a consensus mechanism that verifies the execution of a particular payment. (*)
    • Proof of Proof (PoP) is a consensus mechanism that is used to prove the existence of a particular piece of data. (*)
    • Proof-of-Publication is is a consensus mechanism. (*)
    • Proof of Quality (PoQ) is a consensus mechanism that rewards nodes based on the quality of the data they provide. (*)
    • Proof of Reputation (PoR) is a consensus mechanism that rewards nodes based on their reputation. (*)
    • Proof of Research (DPoR) is a consensus mechanism that rewards nodes based on their ability to perform research. (*)
    • Proof of Resource is a consensus mechanism that rewards nodes based on the resources they provide. (*)
    • Proof of Retrievability (POR) is a consensus mechanism that proves that a particular piece of data can be retrieved from storage. (*)
    • Proof of Space (PoS) is a consensus mechanism that is based on the amount of data that a node can store on the blockchain. See also Proof of Capacity. (*)
    • Proof of Trust (PoT) is a consensus mechanism that rewards nodes based on their trustworthiness. (*)
    • Proof of Use is a consensus mechanism that rewards nodes that contribute to the network. This can be done by providing storage space, bandwidth, or other resources. Proof of Use is more efficient than PoS, but it is also more complex. (*)
    • Proof of Value (PoV) is a consensus mechanism that rewards nodes based on the value they have locked up in the network. This can be done by holding a certain amount of cryptocurrency or providing other valuable assets. PoV is more efficient than PoS, but it can also lead to centralization. (*)
    Hybrid consensus algorithms
    • BlockFlow is a novel sharding algorithm that supports cross-shard transactions natively without using locks or other synchronization mechanisms. It utilizes a DAG (Directed Acyclic Graph) data structure to achieve consensus among shards, ensuring the integrity of the network while maintaining high throughput. This unique approach sets it apart from traditional sharding algorithms, which often require complex mechanisms to facilitate cross-shard communication. (*)
    • Proof of Importance is a consensus mechanism. (*)
    • Proof of Weight (PoWeight) is a consensus mechanism that combines elements of PoS and PoW. Nodes are selected to validate transactions based on the amount of cryptocurrency they have staked and the amount of time they have been online. This makes PoWeight more efficient than both PoS and PoW. (*)
    • Scrypt-adaptive-N (ASICASIC In the mining process, ASICs (Application Specific Integrated Circuit) are devices usually designed for a single cryptocurrency. resistant) is a consensus mechanism that relies on the “Adaptive N-Factor” in which N is the memory required to complete new hashing functions. (*)
    • Secure Proof of Stake (SpoS) is a consensus mechamism that combines eligibility through stake and rating with random validator selection, and an optimal dimension for the consensus group. (*)
    • Semi-Synchronous Proof of Work (SSPoW) is a consensus mechamism that remove the bottleneck that the Proof of Work algorithm imposes on the transaction throughput of the network. This is done by decoupling the choosing of validator nodes, which is done via Proof of Work from the actual transaction validation process. When a node finds a valid Proof of Work, it is advanced into the validator pool where it has an allocated period in which it can validate transactions. This is done asynchronously while the choice of validator nodes (PoW) is synchronous. (*)
    • Serialized Proof of Work Events (Spectre) is a consensus mechanism that utilizes a combination of PoW and DAGs to reach scalable consensus. In SPECTRE, the blocks are mined pointing to multiple parents, not just one, so the network could potentially handle multiple blocks per second. (*)
    • Traditional Proof of Stake / Tiered Proof of Stake (TPOS) is a consensus mechanism through which a cryptocurrency Social Network Blockchain aims to realize distributed agreement. In TPOS-derived currencies, the originator of the next block is selected through different combinations of random collection and the stake. (*)
    • Variable Delayed Proof of Stake (vDPOS). (*)

    Future of consensus mechanisms

    Outlining a future picture of blockchain consensus mechanisms is not easy for these reasons:

    • Blockchain technology is still in development. Consensus mechanisms are a fundamental part of blockchains, and as the technology evolves, new consensus mechanisms are likely to develop as well.
    • Blockchain needs are changing. Blockchains are used for a variety of applications, and the needs of these applications vary. Consensus mechanisms are likely to adapt to these evolving needs.

    The competition is strong. There are many blockchains competing with each other, and each blockchain is trying to find the best consensus mechanism for its needs. This competition is likely to lead to the development of new and innovative consensus mechanisms. In particular, there are some trends that could lead to significant changes in blockchain consensus mechanisms:

    • The growing attention to sustainability. The intense power consumption of PoW is a source of concern for many, and this is likely to lead to an increase in the adoption of more energy-efficient consensus mechanisms.
    • The growing focus on scalability. Blockchains need to be able to handle an increasing number of transactions, and this could lead to the development of more scalable consensus mechanisms.
    • The growing attention to safety. Blockchains must be able to resist attacks, and this could lead to the development of more secure consensus mechanisms.

    In conclusion, considering all these factors, it is clear that it is not easy to outline a future panorama regarding these consensus mechanisms. Indeed, it is difficult to predict what the dominant consensus mechanisms will be. We will likely see new approaches emerge that combine the advantages of different mechanisms to create more efficient, scalable and secure networks.