Consensus Mechanisms in Blockchain

Due to the widespread use of cryptocurrencies like Bitcoin and Ethereum, blockchain has frequently made the news. Numerous businesses are using cryptocurrency to develop new revenue sources. Businesses are also using blockchain for a variety of purposes, including data security and investor identity verification. Different blockchain consensus mechanisms are used by these applications.

Blockchain consensus algorithms essentially support the assurance that all terminals on a network are in sync and that their transactions are valid. To guarantee that every node is linked with the same network and that all transactions are routinely validated, such consensus mechanisms are required for blockchain networks.

The consensus process used by each blockchain network must be unique since various applications call for precise results. When selecting a blockchain consensus method, businesses and blockchain engineers must do their research. Thus, business executives and blockchain technology may start with the intended outcomes and work backwards to find an appropriate consensus mechanism.

There are eight types of blockchain consensus mechanisms which are the following:

• Proof of Work (PoW) – Mining is another name for the Proof of Work process, and nodes are the participants in mining. Miners tackle challenging mathematical riddles that need a lot of processing power. Miners use a variety of mining techniques for this, including GPU mining, CPU mining, FPGA mining, ASIC mining, mining pools, and many others. A block of the crypto blockchain is awarded to the miner who solves a mathematical puzzle first. Only trial and error may be used to find solutions to the puzzles. Because of this, miners require a huge amount of computing power in order to find solutions quickly.
  
  The complexity of the puzzles varies depending on how quickly the blocks are being discovered. The riddles would become harder and vice versa if the blocks were generated rapidly. To carefully alter the puzzle complexity level, new bricks must be made within a specific time range. The Proof of Work algorithm is used by several well-known cryptocurrencies, including Bitcoin. The PoW consensus process, however, uses up resources at an alarming pace. Bitcoin now consumes 51.13 TWh of electricity annually, according to sources. Consequently, this strategy may be pricey.
  
  

• Proof of Stake (PoS) – A random mechanism is used by Proof of Stake to determine who has a chance to create the following block. For a set period of time, blockchain members can start locking up their tokens by becoming validators. Users can create blocks once they have attained the status of the validator. In accordance with the blockchain’s architecture, participants can also be chosen. In general, the person who has the largest stake or has owned coins the longest has a higher chance of forming a new block.
  
  Typically, validators receive all or a portion of the transaction fees from all of the transactions that took place in the block they produced as payment for their services. In contrast, because of inflation, validators can get a certain number of coins. In this manner, validators are rewarded for the upkeep of the blockchain network via the Proof of Stake mechanism. When compared to PoW and other blockchain consensus processes, PoS is much more energy-efficient.
  
  

• Delegated Proof of Stake (DPoS) – Users can stake their coins in the Delegated Proof of Stake procedure and cast their votes for a certain number of delegates. Based on their investment, users’ votes are given different weights. If a user “X” invests twenty coins for a delegate while a user “Y” spends two, for example, X’s vote will be given greater weight than Y’s. The delegate that earns the most votes has the opportunity to create additional blocks. Like all other blockchain consensus algorithms like PoS, delegates are paid with processing fees or a certain number of coins. One of the quickest methods for achieving blockchain consensus is the DPoS technique. Compared to the PoW technique, this one can handle more transactions. DPoS is frequently referred to as a digital democracy because of its stake-weighted voting structure.
  
  

• Proof of Capacity (PoC) – The Proof of Capacity approach involves storing answers to difficult mathematical puzzles on digital media like hard drives. Plotting is the whole process of doing this. Users can use a storage device to produce blocks once it has been loaded with mathematical problem answers. Users that solve the problems the quickest are given the opportunity to design new blocks. Therefore, those with the most storage will have a higher likelihood of creating a new block.
  
  

• Proof of Elapsed Time (PoET) – Based on the amount of waiting time, the Proof of Elapsed Time procedure arbitrarily and equitably selects the developer of a new block. The method assigns a randomized wait time to each user for this reason, and the participant whose wait time expires first will generate a new block. The system must be able to confirm that no user may operate multiple nodes and that the wait time is indeed random for this consensus process to function.
  
  

• Proof of Identity (PoI) – A user’s private key is compared to an authorized identity in Proof of Identity. In essence, a PoI is a chunk of cryptographic proof that links a user’s private key to a particular transaction. A blockchain network allows any authenticated user to generate a data block that may be seen by anybody else on the network. Data integrity and authenticity are guaranteed by PoI. Smart cities can also employ PoI, a blockchain consensus technique, to confirm the citizenship of their residents.
  
  

• Proof of Authority (PoAu) – A modified form of Proof of Stake, the Proof of Authority technique places the identities of network validators at risk. In this situation, identity is the agreement between the personal identity of the validators and their official documents to provide identity verification. These verifiers put their reputation at risk for the network. The only nodes permitted to create new blocks in PofA are those that are validators. The blockchain network’s security and preservation are encouraged among validators whose identities are at risk. Additionally, there are just a few validators (i.e. twenty-five or less).
  
  

• Proof of Activity (PoA) – The Proof of Stake and Proof of Work mechanisms are combined to form the Proof of Activity mechanism. In Proof of Activity, participants look for a puzzle’s answer in order to collect their reward. The blocks produced by the PoA mechanism, however, are only templates containing the header and address of the mining reward. In order to select a random set of validators to sign a block, the information of the header is next employed. The chances of the higher stake validators being chosen to sign the new block are higher. A new block enters the network after the chosen validators sign it. If several validators do not sign the block, it is rejected and a fresh block is used instead.