In our previous articles, we understood about Proof of Work and Proof of Stake consensus algorithms. We have seen why a consensus algorithm is required, how a consensus is achieved, and the resources that are needed to achieve consensus in a blockchain network. The differences between PoW and PoS had been highlighted. Most importantly, their advantages and disadvantages were discussed. By this, we understand the purpose & necessity of the consensus in a blockchain network. But that doesn’t end there, as both the PoW & PoS have their own cons. Hence, it is essential for any new age cryptocurrencies to make its consensus algorithm more and more effective while maintaining low costs.
Hence, industry experts have come up with more consensus algorithms to suit the requirements of the network. Let us have a look at some of the notable ones below:
Delegated Proof of Stake (DPoS)
Delegated Proof of Stake is a modified version of Proof of stake consensus which helps in achieving the consensus more efficiently. In PoS, the consensus is reached when a user stakes the native currency of the network, earning a right to forge a block and thereby earning a reward for validating the transactions. In DPoS, users get to vote and choose the witnesses who can validate the transactions. The top tier of witnesses, i.e. users with maximum votes, are selected to validate transactions. These witnesses can even delegate their right to validate transactions to other users who are trustworthy to them.
The amount of currency each user holds in a network has nothing to do with them being a witness in the network. The weighting of voting rights of a user depends on the amount of currency one holds. Users with large stake can vote for the users with small stake thus enabling them to enter the top tier of witnesses. This is just like democracy enabling the most trustworthy individuals to validate the transactions. This is touted to be the least centralised consensus algorithm.
Witnesses in the top tier do not exceed a specific number. These witnesses are responsible for validating the transactions, therefore, forging a block and thereby earning the associated rewards. Voting is a continuous process, and the users even have the right to remove a witness from the top tier, if one loses the trust of the users in the network. Thus, maintaining the trust and respect for a witness is an incentive to not get dethroned from the top tier as one loses their income.
DPoS is much faster than PoW and PoS consensus algorithms. It is also energy-efficient and not much computing power is required; anyone with a normal computer can join the network. This consensus algorithm drastically increases the speed and scalability when compared to PoW and PoS.
Lisk, EOS, Bitshares blockchains are some of the examples using DPoS.
Proof of Elapsed Time (PoET)
PoET is used in permissioned blockchain networks. Permissioned blockchain networks are the networks where every user identity is known. The network decides whether to permit the user into the network or not, based on the predefined set of criteria. Permissioned blockchains are used by business enterprises to maintain their security and confidentiality by knowing the identity of each person in the network.
To explain PoET consensus algorithm at a high level, each user must choose a random wait time and goes to sleep. The first user to wake up i.e. the one with the shortest time period wins the next block. There are two things to note here,
- to verify if the leader chose a random time period to wait or intentionally chose a shorter period
- to verify if the leader indeed waited for the required time period or not
PoET was invented by Intel (the chip manufacturing giant) in 2016. Intel came up with specialised hardware to verify the above two requirements. The ingrained computing mechanism runs in a trusted environment ensuring the random time period is allotted to each user, and the user waits for the required time period as required.
PoET is very cost-effective when compared to PoW, as the mechanism allows the users processing power to sleep when not required and allows the processing power to be used for other applications. We can see that the computing power required is very less. Since it is a permissioned network, and the specialized hardware is required from Intel, there is a process to register and get all the requirements installed in your machine.
Hyperledger Sawtooth uses PoET as the consensus algorithm.
Proof of Burn (PoB)
Proof of Burn consensus algorithm is again developed as an alternative to Proof of Work consensus algorithm. PoB is also called PoW without computing or electricity wastage, essentially making it eco-friendly.
In PoB, the users have to burn the virtual currency, to gain the rights to mine the next block. The virtual currency that is being burnt can be native currency or the currency from any other blockchain as well. The coins are sent to the verifiable, unspendable address to burn. That’s it. No more resources are used other than the currency that is being burnt. The users earn the rights to mine the next block in proportion to the number of coins burnt. The users receive native currency as a reward to mine the block.
Slimcoin is a cryptocurrency that uses PoW as the consensus algorithm.
Proof of Activity (PoA)
Proof of Activity consensus algorithm uses a combination of both PoW and PoS, thus making it a hybrid version of the famous and reliable consensus algorithms so far. Same as PoW, miners compete to mine a new block addressing the challenge proposed by the network. The new block that is mined contains only the header and miners address. Now the system switches to PoS to choose the next set of validators based on the details available in the first block. PoS is used as the next set of validators are chosen based on the amount of currency each holds.
There is a lot of criticism on PoA as it partially uses both PoS and PoW as a lot of energy is indeed required and wasted initially.
Decred is a cryptocurrency that uses PoA as the consensus algorithm.
More and more consensus algorithms are coming up to ensure less wastage of resources and maintain the credibility of blockchain networks. It is necessary to note that these new consensus algorithms are rigorously tested for their reliability and adaptability in order to work better. How many of these consensuses did you know before? Do you know any more consensus other than the ones listed above? Let us know in the comments below.