Blockchain is said to enable a trust-less distributed system with no third party. Therefore, how agreements are reached and the decision-maker of the agreements are crucial. Unlike the traditional systems where there are central authorities, Blockchain networks allow a community-based Consensus. OpenLedger defines Consensus in its basic form as a general agreement within a system. Consequently, Consensus on Blockchain refers to how agreements are made and who makes the agreements.

What is Consensus on Blockchain? 

Understanding how Blockchain works, will provide better insight into Consensus on Blockchain. Consider Blockchain as a chain of blocks where transactions are timestamped, transparent, and secure. Since it is a distributed ledger across various nodes, transactions occur in blocks. Consequently, every block across the nodes interconnect with each other, hence, it is called a “chain of blocks.” In Blockchain, unlike the traditional system, most nodes approve transactions that can be written on the blocks. 

In simple terms, the Consensus determines how transactions are written on the blocks across the nodes.

Consensus on Blockchain is a set of algorithms that enable network participants to agree on the contents of a Blockchain in a distributed and trust-less manner. Therefore, this article is dedicated to sharing the different Consensus mechanisms or algorithms on Blockchain.

Building Consensus-Based Blockchain.

According to the Blockchain Consensus Encyclopedia, there are over 72 Consensus mechanisms on Blockchain that are categorized into six models. However, you have to do your due diligence to choose the mechanism that suits your use cases. Here are Consensus mechanisms you should be familiar with:

Proof of Work. 

This is a child case of Bitcoin and has been adopted in other Blockchain, including Litecoin and Dash coin. In Proof of Work, Consensus is reached based on the amount of work done, essentially mathematical computations. By design, Blockchain allows miners to verify and generate blocks. Through solving problems, miners are rewarded for each block they add or verify. 

However, it requires an enormous amount of energy and can sometimes become problematic when the reward is lower than the cost of work. Also, when particular miners can control 51 percent of nodes, malicious activity can occur. Meanwhile, Dashcoin tried to adopt a better rewarding model through a master node, hosting to incentivize miners. 

Proof of Stake. 

Unlike a work-reward model of Consensus, like in Proof of Work, Proof of Stake operates a staking-based Consensus. The more stake a holder obtains, the more control the holder owns on the network. 

Proof of Stake is similar to buying shares in a company, where the higher the stakes, the more decision capacity. Before Ethereum, the first implementation of PoS was Peercoin.

It requires no specialized computing and does not require much energy. However, Consensus could be delayed or not achieved when a block generator has nothing to lose by voting on multiple Blockchain histories. More so, the network could be vulnerable when a fake stake attacks the system.

Delegated Proof of Stake.

Delegated Proof of Stake is an improvement of the Proof of Stake through a delegated voting model. It has a similar staking functionality like Proof of Stake, but includes a democratic voting system where block producers are elected as delegates. Daniel Larimer developed dPoS in 2014. However, several projects are adopting it, including  Bitshares, Steem, Ark, and Lisk. Other types of Proof of Stakes include Proof of Stake-Time, Casper (CGC), Casper (FFG), Variable Delayed Proof of Stake, Leasing Proof of Stake, and High Internal Proof of Stake.

Proof of Concept. 

This Consensus is similar to the Proof of Work, except that it replaces mining with plotting. It is often called Proof of Space. Contrary to Proof of Work where miners solve complex mathematics for the correct solution, solutions are pre-installed. Consequently, the more storage capacity a miner has, the more solutions are pre-installable. The Consensus mechanism simplifies mining by replacing the sophisticated devices with memory space. 

Like other Consensus mechanisms, it shares advantages and disadvantages. Its significant drawbacks have a lower adoption rate and the possibility of malware affecting mining activities. Three examples of Proof of Capacity projects are Burstcoin, SpaceMint, and Chia.

Other types of PoC Consensus mechanisms include Proof of History, Proof of Reputation, Proof of Signature, Proof of Importance, and Proof of Weight. 

Byzantine Fault Tolerance (BFT) Model. 

Research shows that some blocks fail in the process of reaching Consensus in Proof of Work, hence the need to safeguard the nodes. Therefore, the BFT Model is a type of Consensus on a distributed system designed to reduce the influence of faulty nodes. Hyperledger and Lisk are examples of Blockchain projects using the BFT Model.

Various types of BMT Consensus mechanisms include Asynchronous, Delegated, Practical Federated BFT, and Modified Federated BFT. 

Hybrid Model.

Proof of Stake and Proof of Work has strengths, as well as weaknesses. Hence, Hybrid Consensus models combine Proof of Work and Proof of Stake to achieve better Consensus. On the Proof of Work, it harnesses the DoS attack resistance, while in the Proof of Stake, it leverages the staking model. An example of a Blockchain project implementing the Hybrid Consensus is Decred. 

Various types of Hybrid Consensus mechanisms include Proof of Authority, Proof of Activity, Limited Confidence Proof of Activity, Proof of Care, and Proof of Processed Payments. 

Proof of Burn.

Proof of Burn is Proof of Work without energy waste, as it addresses high energy requirements. In the Proof of Burn system, miners are granted the power to write blocks proportional to the coins burnt. However, coin burning allows miners to burn virtual tokens, which further will enable them to write blocks. 

An example implementation is Slimcoin. 

Various types of Proof of Burn Consensus mechanisms include Proof of Time, Proof of Disintegration, and Proof of Processed Payments.

Conclusion

Unlike the traditional systems, Blockchain enables a community-based Consensus. There is a total of 72 types of Consensus on Blockchain, but are broadly classified into six. Meanwhile, the multiple classes are improvements of Proof of Work and Proof of Stake. Consequently, it is a requirement to perform Consensus-based research to determine which one suits your project, as stated above. 

Okereke Chinweokwu

Okereke has a passion for researching blockchain and cryptocurrency. He enjoys creating long form educational content to inform others on the opportunities in this space.