Understanding Blockchain Consensus Mechanism

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INTRODUCTION

Since blockchain is based on distributed networks, there must be deputies for every participant’s consensus as to what the blockchain represents. This is where consensus mechanisms come in. Transaction verification, data security, and versioning of the distributed ledger among its participants – all these purposes are solved through special protocols known as consensus mechanisms. Should there be no well-functioning consensus mechanisms, blockchains can be optimized to defeat many attacks, risks, and shortcomings.

One of the most popular types of consensus methods is Proof of Work, which is used, among other cryptocurrencies, in Bitcoin. But there are also many others such as Proof of Stake, Delegated Proof of Stake DPOS or Practical Byzantine Fault Tolerance PBFT. In the design of a given blockchain, such decisions will affect the capacity, security and energy use efficiency of the system employed and are therefore very important for the success of the network.

With the growth of blockchain technology, more advanced consensus mechanisms are being investigated and put in place with the aim of increasing efficiency and reducing power use. It is important to know these mechanisms in order to understand how decentralized systems work and what compromises are needed intribution to their definitions.

PROOF OF WORK (PoW):

It is the most ancient, known and implemented form of consensus mechanism by bitcoin. In this case, there is a competition among the miners to crack the mathematical puzzles, the person who solves it first is given cryptocurrency as the reward and the block is then hosted on the blockchain technology.

While the PoW mechanism does provide an impressive amount of network security, it is still a bit of a disincentive for the hackers to break into the network since it takes a lot of effort, and time and even resources to be able to crawl the network and crack the mechanical puzzles.

But some disadvantages still exist. This may result in centralization, since only a handful of people have the financial resources for the costly devices that are necessary to obtain new blocks. However it remains the most safe and broadly accepted consensus mechanism.

PROOF OF STAKE (PoS):

Blockchain’s Proof of Stake (PoS) model was conceived as in opposition to PoW, especially in relation to energy consumption concerns. Rather than determining which miner can add the next block to the chain, PoS selects who will participate in the process based on how many tokens the participants possess and are willing to purchase as a type of security deposit. The stakes work in favor of the stakeholders in the sense that the more stakes a validator has, the more chances he/she has to be picked out to endorse a particular block.

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Due to its structure and mechanics, one of the significant advantages of PoS is the reduced energy usage. As it doesn’t involve the so-called PoW it considerably cuts down on environmental impact of the block chain networks. PoS is much more cost effective than PoW as it also enhances the system’s scalability leading to quicker transaction periods and lesser expenses.

Nevertheless, this leaves room for abuse since PoS can give room for the centralization of the concern since those with bigger staked tokens can stifle the network. Still, many blockchain networks, including Ethereum, aim to move from PoW to PoS in pursuit of efficiency and sustainability, while high security remains intact.