You can think of a blockchain as a distributed ledger held by multiple nodes or computers in a peer-to-peer network. Every node in the network needs to validate the data recorded on the blockchain. This makes the network secure, immutable, and transparent. Basically, every node in the network needs to reach consensus in order to make changes or perform read / write actions on the network. This is the central mechanism for building a blockchain network. All existing blockchains use a consensus mechanism in some way or way.
The most popular is the Proof of Work (PoW) consensus mechanism. It is used by the two largest cryptocurrencies on the market, Bitcoin and Ethereum. In PoW, nodes need to solve complex computational puzzles, add new blocks to the blockchain, and add transactions to the network. Nodes typically use energy-intensive computing hardware to solve these puzzles, and the first node to solve the puzzle and add blocks will be rewarded with Bitcoin tokens. This process is known as Bitcoin mining. PoW mining has been under considerable surveillance over the past year or so. Because of its energy consumption And it leaves behind the carbon footprint that follows. This is why the Ethereum Network is moving from Proof of Work Mechanisms to Proof of Stake (PoS).
The PoS consensus mechanism alleviates PoW’s energy consumption problem. In PoS, a node can choose to be a validator betting crypto tokens on a shared memory pool or mempool (pool of coins) to validate transactions within the network. The rewards a node gets from staking depends on the number of tokens the node has stakes. PoS was built as an alternative to PoS and has become the second most popular consensus mechanism.
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However, these are not the only consensus mechanisms used. Innovations in consensus mechanism technology are also taking place as the number of blockchain networks appears to be emerging every other day. Some of the new consensus mechanisms are built behind the old ones, while others are entirely new. Here are seven consensus mechanisms you may not know.
Proof of Burns (PoB): This consensus mechanism also does not require large computational hardware. Instead, it uses the concept of writing coins, where participants in the consensus mechanism send / write coins to addresses where the private key is unknown. No one can get the private key, so they cannot access the address. These addresses are often referred to as the eater’s address.
Participants promise to be part of the consensus mechanism by burning coins. Coin burners are randomly selected to mine the next block in the chain. This is a sacrificial mechanism by which miners have to sacrifice some of their holdings in the short term for long-term gains. The more coins a miner burns, the more likely it is that a node will be selected to mine the next block.
Slimcoin, an alternative cryptocurrency based on Peercoin, uses write proof as a consensus mechanism.
Delegated Proof of Stake: DPoS is an iteration of the PoS consensus mechanism. Here, the validator bets coins and chooses a delegation responsible for blocking verification on behalf of all nodes in the network. It is very similar to how people in democracies choose representatives to govern the state or the country itself on their behalf.
Suppose Node X bets 20 on a delegate and Node Y bets 2 coins on the same delegate. X is more influential than Y. The delegate with the most votes from the node has the opportunity to mine the next block. Typically, 21-100 delegates are selected on the network using this method.
Blockchains such as Cardano, EOS and TRON use the DPoS consensus mechanism.
Proof of capacity: PoC is an iteration of PoW to remedy the shortcomings. With this consensus mechanism, the solution to PoW’s complex computational puzzles is already stored on the storage device. It uses a process called plotting that involves determining all possible solutions for the hash algorithm before the mining process begins.
The user who arrives at the solution earliest (already stored on the storage device) gets the privilege to create a new block in the chain. This process uses less energy than the PoW model and the user does not need any special software to participate.
The Signum / Burstcoin Burstcoin blockchain operates using a proof of concept (PoC) consensus mechanism.
Proof of elapsed time: The PoET consensus mechanism uses only identifiable and verifiable nodes for mining. This is important because the nodes are selected based on the amount of time they have waited for mining of new blocks. This mechanism randomly allocates a specific wait time, and the node whose wait time has expired can mine a new block. No node has permissions or privileges on other nodes because the wait time assigned is random. PoET is even more energy efficient than PoS.
Proof of authority: PoA is also a spin of the PoS mechanism where validators bet their own ID instead of coins. In the case of PoS, wealthy participants who can stop the monetary loss of bet coins can waive their verification obligations, but in PoA, participants are betting their reputation. The node betting reputation is the only node that can mine new blocks and validate transactions.
VeChain is a smart contract platform that utilizes the PoA consensus mechanism.
Proof of activity: A In Proof of Activity, a hybrid of PoW and PoS consensus mechanisms, initially miners follow the same route as PoW mechanisms, using hardware to solve complex computational puzzles and introduce new blocks. However, the twist is that the block created is just a template containing reward information and header information.
Then use the header information to select a group of validators to sign the new block. Validators who bet more coins are more likely to be chosen to sign the block. When the validator signs the block, it is added to the network. The generated rewards will be evenly distributed among the miners and validators. If the validator does not sign the block after mining, the block will be discarded.
Decred (DCR) is a well-known blockchain project that uses the Proof of Activity consensus mechanism.
Proof of Importance (PoI): This is another consensus mechanism built behind PoS. In PoI, a node is valued according to the coins bet and how long the node owns the node. Other metrics such as the number of transactions on the node in the network, net forwarding, and the amount and size of transactions over the last specified number of days are also taken into account in the evaluation given to the node.
PoI weighs a node and measures its presence in the network. Highly rated nodes can first add new blocks to the network. Taking into account factors other than bet coins will reduce the dominance of the whale that holds the most coins in the network.
XEM (New Economic Movement), a fork of the cryptocurrency NXT, has introduced a consensus mechanism to prove its importance.
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