Exploring the Consensus Algorithms of Blockchains

Overview of Blockchain Technology

Since the Blockchain network is a decentralized network, an inherent challenge of validation arises. For any block to be added in a blockchain, it has to undergo validation. Blockchain is like a database containing valuable information, therefore, it becomes imperative for all the nodes to make sure they have the most updated and verified copy of it. Part of what makes Blockchain technology so popular is its robust security and validation.

The mechanism through which the blocks are verified and made secure is called a consensus algorithm. Providing a method for every new block in a blockchain to be the only true version that is agreed upon by all the nodes. Different protocols and rules exist in the consensus agreement which provides trust for unknown nodes to agree upon the present state of the distributed ledger. Essentially, consensus algorithms provide a criterion for all the nodes to agree upon a common validation process.

Types of Consensus Algorithms

There are many different types of Consensus algorithms, rendering a different verification process. Before discussing them let’s overview a few common characteristics of the consensus algorithm.

Stake:

For any node to validate a block, firstly it needs to put forward a stake or collateral. It could be in any shape or form. The stake can be the computational power, reputation, or even the coin ownership of the native coin. This prevents the nodes from indulging in unfair dishonest activities.

Reward:

Nodes who validate the blockchain receive a reward for spending their stake, usually in the protocol's native cryptocurrency.

 

Top 2 Consensus Algorithms:

• Proof of Work (POW):

Proof of Work rings synonymous with Bitcoin. Many assume PoW started through Bitcoin however, it is not entirely true. PoW existed before the inception of bitcoin and is regarded as the godfather of the blockchain consensus algorithm. Initially presented in a 1994 paper by Markus and Ari, it was later eventually refined and altered. 

This consensus algorithm drives the idea of competition. Nodes compete with each other to validate the new block. Once the new block is verified only then the block is added to the blockchain. Proof of Work pertains to solving a tough mathematical puzzle or a question. A node that is the quickest to solve the puzzle gets to validate the block. It also broadcasts the right answer to all the nodes and as a reward receives a small amount of the protocol's native cryptocurrency.

This method of mining and validation is very popular however, the caveat being the need for tremendous computational power. Since the competition is based on solving the mathematical puzzle in the shortest amount of time, nodes with more powerful computational power will possess a higher chance of solving it. This also increases the power required to operate the computing.

• Proof of Stake (POS):   

Widely regarded as the most viable alternative to Proof of Work. A Proof of Stake consensus algorithm steers clear of the miners, hardware, and huge energy challenges. It aims to provide a more elegant solution to the shortcomings of PoW. 

The validators in the system agree to place forward a part of their stake. Unlike PoW, no external resource is invested rather validators lay down the internal resource – the native cryptocurrency. The node which places the highest stake gets the chance to validate the block first. Nodes with smaller stakes validate the block afterward. However, instead of rewarding the node which quickly solves the puzzle first, all nodes are rewarded according to their respective stakes in the system.

There are other slight variations to the PoS as well. In one instance, nodes lock up the stakes or funds and typically agree with other validators on what transactions will go next into the next block. In a sense, they're betting on the block that will be selected. If their block is selected, they are rewarded against their respective stake. The more stakes you place forward the more chances of reward.

  

Closing thoughts:

For any distributed network to work, achieving consensus on the validation process is important. It is due to the mutual agreement that blockchains are thriving and undergoing rapid growth. From monetary transactions to data sharing, verification of the blocks is critical. Both the aforementioned consensus algorithms share the same characteristic, placing a stake for mining rights. Choosing the correct algorithm for the blockchain network, therefore, becomes very crucial.

Antlia is an Interoperable and scalable blockchain with trusted smart contract based oracles for seamless data and asset sharing.

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