Consensus Algorithms / Mechanisms in Blockchain
A Consensus Algorithm is a process used in blockchain networks to reach agreement on a single data value (block) among distributed, often untrusted nodes.
Consensus algorithms ensure that all nodes in a blockchain network agree on the same ledger state despite faults or malicious behavior.
Broad Categories of Consensus Mechanisms:
- Proof-based / Nakamoto-style (Leader-election lottery-based)
- Used in permissionless (public) blockchains like Bitcoin, Ethereum (PoW).
- Nodes compete to become leader (block proposer).
- Byzantine Fault Tolerance (BFT)-based
- Used in permissioned (private or consortium) blockchains.
- Nodes participate in a round of votes to agree on the value.
List of Major Consensus Algorithms:
1. Proof of Work (PoW):
- Used in Bitcoin, Litecoin.
- Nodes (miners) solve complex mathematical puzzles.
- Ensures security against Sybil attacks.
- Highly secure but energy-intensive.
2. Proof of Stake (PoS):
- Used in Ethereum (future), Peercoin.
- Validators are selected based on the amount of cryptocurrency they “stake”.
- Energy efficient, based on trust and investment.
3. Delegated Proof of Stake (DPoS):
- Used in BitShares.
- Token holders vote for delegates who validate transactions.
- Improves speed and scalability.
4. Proof of Elapsed Time (PoET):
- Developed by Intel; used in Hyperledger Sawtooth.
- Uses Trusted Execution Environment (TEE) for random leader selection.
- Requires Intel SGX hardware.
5. Proof of Deposit (PoD):
- Used in Tendermint.
- Validators deposit a security amount to gain the right to propose blocks.
6. Proof of Importance (PoI):
- Used in NEM blockchain.
- Selection based on stake + transaction behavior and network activity.
7. Federated Byzantine Agreement / Federated Consensus:
- Used in Stellar.
- Nodes trust a group of public validators for transaction approval.
8. Reputation-Based Mechanisms:
- Leader chosen based on reputation score built over time.
- Reputation is calculated from past behavior and community votes.
9. Practical Byzantine Fault Tolerance (PBFT):
- Tolerates malicious (Byzantine) nodes.
- Used in permissioned systems.
- Fast but works best in networks with limited nodes.
10. Proof of Activity (PoA):
- Hybrid of PoW and PoS.
- PoW for initial block creation, then PoS for block validation.
11. Proof of Capacity (PoC):
- Uses hard disk space instead of CPU (BurstCoin).
- Known as “hard drive mining”.
12. Proof of Storage (or Proof of Space/Time):
- Participant must store specific data to join consensus.
- Variants:
- Proof of Replication
- Proof of Data Possession
- Proof of Space-time
13. Proof of Authority (PoA):
- Validators are known and trusted authorities.
- Used in private/consortium blockchains.
- Examples: Clique, Aura.