Blockchain is probably something familiar to you, especially you may know it was first applied to the cryptocurrency. All you know about blockchain is about the technology underlining the creation of cryptocurrency, as a digital currency that sees its popularity increase in some recent years. However, blockchain is more than that, it is often defined as a distributed ledger containing records of previous transactions made in the past.
The key to operate the distributed ledger is by ensuring the whole network agrees with the content. And this is where the consensus mechanism enters into action. We can also say that there’s supposed to be a consensus mechanism behind the existence of cryptoassets.
The Importance of Blockchain Consensus?
The consensus is known as the “general agreement” this is essential in blockchain technology. It aims at verifying the information that is being added into a ledger as absolutely valid. Indeed, the authority to keep the centralized account in one entity such as a centralized payment or bank system will be processed by the blockchain technology or distributed ledger in order to record the information.
The consensus mechanism has two objectives to reach a fair agreement delivered to all involved parties. First, it has to ensure there is a valid block in the blockchain. Second, to ensure that there won’t be anyone able to successfully fork the chain.
Two Types of Blockchain Consensus Mechanism
There are actually some common consensus mechanisms that you may not know. But here, we are going to talk about some of the most general types of consensus mechanisms : Proof of Work and Proof of Stake.
Consensus Mechanism 1: Proof of Work
This mechanism is the most commonly used and the oldest one introduced first by Cynthia Dwork and also Moni Naor in 1993. Then, in 1999, Markus Jakobsson coined its actual term of Proof of Work (PoW). In this mechanism, all computers in network miners will work in solving the cryptographic puzzle repeatedly, consisting of a mathematical hash or function. We can find the first invention of the protocol popularized by Bitcoin credited to Satoshi Nakamoto.
Transactions processed in the Bitcoin blockchain are concentrated in one memory pool. They call it “mempool” where a block is created every 10 minutes. It has to be verified to be accepted in the “mempool” for every transaction. Done by the miners, this process of transaction verification is called ‘mining’. PoW has a big responsibility for the whole mining process, operations, and power consumption.
The pros of PoW is that this is a proof the work was perfectly completed. The cons, it is criticized for its huge energy consumption and it is not well scaled with the big problem or issues in the transaction confirmation. Some coins using it are Ethereum Classic, ZCash, Monero Original, and some others.
Consensus Mechanism 2: Proof of Stake
This is a credible opponent to the PoW. In this case, Proof of Stake (PoS) will not require any computer in performing the repetitive computations. Therefore, it will be environmentally friendly. This consensus mechanism replaces the miners using validators in which they lock several of those coins as the stake. The group of validators is alternatively proposing and also voting for the next block. The weight of every validator voting will depend on the size of the stake.
Because this doesn’t require any miners, the validators will stake their own coins to bet which block will be valid in order to add it into the chain. When the fork happens, they will be consulted again on which fork is to be supported. In these fair conditions, the validator that chooses the wrong fork will lose the stake in the right fork.
The pros of this PoS lays on its efficient energy consumption and more decentralized system. But, it also has cons, in betting on the stake. Some coins apply this consensus mechanism such as DASH, Neo, PivX, and others.
Those are the two most common types of blockchain consensus mechanisms used so far. Understanding this information will help your researches about the different types of consensus mechanism in the blockchain.
Want to learn more? The following articles may be of interest to you