Consensus mechanisms also known as consensus algorithms are nothing but a decision-making process which is performed by a group of people. They support a common decision which is best suited for everyone in the group. In this, the group members have to follow the decisions which are in the majority. The rest who is not in favor of the decision also have to go with the majority. To make it more clear let’s consider a simple example. Suppose there is a group of people who want to take some decision which will benefit their company’s sales. Each one of them has the right to suggest some good ideas and techniques, but the majority of people from the group will be in favor of the one idea that will help them the most.Other individuals in the group have to deal with this decision whether they liked it or not.
Now let’s consider a broader scenario where thousands of people are involved in that group.Wouldn’t that make it way more difficult? Consensus algorithms not always are in favor of majority votes, but it also favors to one that benefits all of them. Blockchain consensus algorithms were invented to maintain equality in the online world.
Different types of Consensus Algorithms/Mechanisms:
It is the very first blockchain consensus mechanism. It was first used by bitcoin. The process in consensus is known as mining and the node is called as miners. Miners have to solve complex puzzles in order to verify a transaction, in return they receive some reward. To solve the complex puzzle, miners has to use a lot of computation and resources. This is a major drawback associated with PoW, hence some blockchains are moving to different consensus mechanisms.
Contrary to the proof-of-Work, where the miners are rewarded for solving mathematical problems in order to validate transactions and creating new blocks, with the proof of stake, the creator of a new block is chosen in a deterministic way, which depends on its wealth or assets,also known as stake.
DPoS (Delegated Proof-of-Stake)
DPoS is also known as digital democracy. It is the most powerful consensus mechanism. A DPoS-based blockchain counts with a voting system where stakeholders are able to vote for a few delegates that will secure the network on their behalf. The delegates are responsible for achieving consensus during the generation and validation of new blocks. Each delegate presents an individual proposal when demanding for votes.
Proof of Capacity uses a process called plotting. In this, solutions to a problem are pre-stored in digital storages like hard disks. This process is known as plotting. Whenever storage has been plotted as in when storage gets filled with solutions then that miner can take part in the block creation process. Whoever completes the storage part for puzzle first, gets to create the new block. The more storage capacity you have, the more solutions you can store, the higher your chances of creating a block are.
When coins are destroyed in a blockchain, it is not actually destroyed, we send those coins to some address from where coins cannot be reused or spent. This address is known as eater address. This eater address has no private keys so that it is publicly visible but not accessible for spending. These transactions get added on the blockchain, so that there’s a necessary proof that the coins cannot be spent again, and the user who burned the coins gets rewarded.
PoWeight is based on Algorand consensus model. By making use of Algorand consensus model, transactions get confirmed very quickly. Each user on a network of PoWeight has a“weight” associated with it. This weight depends upon the asset the user has in his account. Till the over all weighted fraction of the users are honest – usually, two-thirds or greater – the network will remain secure. This method also secures the network from double-spending.
We have gone through some of the most common consensus algorithms, however this isn’t it,there are more such algorithms which we will go through in the next article. At the end of the day, all these consensus mechanisms have the same vision of reaching consensus in a decentralized network. They actually vary wildly in their approach to gain consensus. No ideal consensus mechanism exists till now, but it’s fascinating to see that how so many consensus mechanisms were grown eventually in the long run by their necessities.