Cryptopedia
Consensus Mechanism
Consensus algorithm solves the trust issues of blockchain, that is,
using a particular algorithm to prove that a certain node is qualified
to validate a new block and add it to a blockchain, so as to make each
node on the chain reach consensus. The consensus algorithm decides the
mining rules.
Decentralization of the blockchain refers to the equivalent rights of each node, while the information is transparent to the public. To make sure that each node would maintain the security and immutability of blockchain information proactively, it is crucial to have a common mechanism. The consensus algorithm picks a ledger keeper among the competition of the nodes so that it can avoid the inconsistency of the records of each node caused by network latency or other factors.
At the same time, the node which gets the right to keep accounts can add the block to the chain and gains the block rewards and handling fees. In this mechanism, the benefits of attacking the blockchain are lower than that from the mining. Hence each node abides by the consensus mechanism by participating in mining and maintaining the running of the network to achieve the maximum benefits.
At present, the mainstream consensus algorithms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).
Proof of Work (PoW)
Proof of Work (PoW) is a consensus mechanism that measures the work of the calculation, and Bitcoin is now applying this.
The PoW works through hashing a rational value: the data of the block head will be put into the hash function, and the random number of it will be continuously adjusted till a hash value that meets the standard comes out. In simple terms, any node which has more computational power has a more significant probability of gaining the right to keep accounts.
This mechanism requires substantial calculation during the verification procedure, but the hash value can be easily validated by other nodes, both of which consist of a solid network that can’t be cheated by some evil nodes. However, this runs at the price of abundant energy consumption (mainly electricity and hardware consumption), which is not environmentally friendly. Apart from this, theoretically, 51% computational power of the whole net can give rise to an effective attack of the blockchain. Hence many small-value altcoins created based on bitcoin are assaulted.
Proof of Stake (PoS)
Proof of Stake (PoS) also works through hashing a rational value, but PoS refers to the duration and amount of the nodes’ holding cryptocurrencies to decide each node’s stake. The hash values of the nodes are different, which depends on their stake percentage. The node with larger stakes can work out the value in an easier way so that it can gain the right to keep accounts of the next block.
This mechanism, which doesn’t require a huge calculation of each node, can save the electricity. Meanwhile, 51% attack is not incentivizing under PoS because those who launch the attack eventually diminish their benefits. However, the nodes holding a large amount of cryptocurrency may have absolute rights to keep accounts, which eventually triggers the trust issues.
Delegated Proof of Stake (DPoS)
Delegated Proof of Stake (DPoS) is a mechanism, where the holders vote to pick several representatives to reach consensus. The more cryptocurrencies they hold, the larger proportions their votes occupy. And the voted representatives are qualified to take turns to keep accounts, while those who perform their duties well will be removed from the voting list. Once the representatives’ tenure ends, a new batch will be selected by voting gain.
DPoS, inheriting the advantages of the PoS, is more efficient than PoS. But it is similar to a political representative , which seems to go against the decentralization of the blockchain.
The increase of the blockchain trading results in the congestion of the public chain network, so compared to traditional finance, the speed of settling accounts on the blockchain has lost its merits. In a distributed , each node may not reach a consensus for different reasons, which makes it harder to secure the running of the block. However, the advent of current consensus plays a significant role in maintaining the completeness and security of the cryptocurrency network.
Decentralization of the blockchain refers to the equivalent rights of each node, while the information is transparent to the public. To make sure that each node would maintain the security and immutability of blockchain information proactively, it is crucial to have a common mechanism. The consensus algorithm picks a ledger keeper among the competition of the nodes so that it can avoid the inconsistency of the records of each node caused by network latency or other factors.
At the same time, the node which gets the right to keep accounts can add the block to the chain and gains the block rewards and handling fees. In this mechanism, the benefits of attacking the blockchain are lower than that from the mining. Hence each node abides by the consensus mechanism by participating in mining and maintaining the running of the network to achieve the maximum benefits.
At present, the mainstream consensus algorithms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).
Proof of Work (PoW)
Proof of Work (PoW) is a consensus mechanism that measures the work of the calculation, and Bitcoin is now applying this.
The PoW works through hashing a rational value: the data of the block head will be put into the hash function, and the random number of it will be continuously adjusted till a hash value that meets the standard comes out. In simple terms, any node which has more computational power has a more significant probability of gaining the right to keep accounts.
This mechanism requires substantial calculation during the verification procedure, but the hash value can be easily validated by other nodes, both of which consist of a solid network that can’t be cheated by some evil nodes. However, this runs at the price of abundant energy consumption (mainly electricity and hardware consumption), which is not environmentally friendly. Apart from this, theoretically, 51% computational power of the whole net can give rise to an effective attack of the blockchain. Hence many small-value altcoins created based on bitcoin are assaulted.
Proof of Stake (PoS)
Proof of Stake (PoS) also works through hashing a rational value, but PoS refers to the duration and amount of the nodes’ holding cryptocurrencies to decide each node’s stake. The hash values of the nodes are different, which depends on their stake percentage. The node with larger stakes can work out the value in an easier way so that it can gain the right to keep accounts of the next block.
This mechanism, which doesn’t require a huge calculation of each node, can save the electricity. Meanwhile, 51% attack is not incentivizing under PoS because those who launch the attack eventually diminish their benefits. However, the nodes holding a large amount of cryptocurrency may have absolute rights to keep accounts, which eventually triggers the trust issues.
Delegated Proof of Stake (DPoS)
Delegated Proof of Stake (DPoS) is a mechanism, where the holders vote to pick several representatives to reach consensus. The more cryptocurrencies they hold, the larger proportions their votes occupy. And the voted representatives are qualified to take turns to keep accounts, while those who perform their duties well will be removed from the voting list. Once the representatives’ tenure ends, a new batch will be selected by voting gain.
DPoS, inheriting the advantages of the PoS, is more efficient than PoS. But it is similar to a political representative , which seems to go against the decentralization of the blockchain.
The increase of the blockchain trading results in the congestion of the public chain network, so compared to traditional finance, the speed of settling accounts on the blockchain has lost its merits. In a distributed , each node may not reach a consensus for different reasons, which makes it harder to secure the running of the block. However, the advent of current consensus plays a significant role in maintaining the completeness and security of the cryptocurrency network.
