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:PoW (Proof-of-Work)
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. Tillthe overall 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.