As we all know, a blockchain is a decentralized ledger that is used to record transactions across many computers so that the records cannot be changed or altered by subsequent blocks without collusion within the network. Every block seen by blockchain stakeholders creates a distributed memory, a formal record of transactions that ensures data is visible and unchanged since its creation. So, what is the soul of the blockchain? What mainstream consensus mechanisms does it have?
What is the soul of blockchain?
Blockchain, in layman’s terms, is a decentralized ledger. It’s just that this account book is different from the traditional account book. Instead of accountants or a small number of people doing the accounting, everyone can participate in the accounting.
Moreover, this bookkeeping requires a rule that everyone agrees with, that is, “how to keep accounts is effective”, and this rule that everyone agrees with is the consensus mechanism of the blockchain.
For example, our family plans to travel abroad, and after discussion, we choose Thailand, so traveling to Thailand is the consensus of your family. The form of discussion is that the minority obeys the majority, and the minority obeys the majority, which is the consensus mechanism for your family to determine the tourist destination.
Similarly, PoW, PoS, and DPoS represent the three key accounting standards of the blockchain network. They are particularly effective and directly related to the distribution of accounting rights and related profits. It is no exaggeration to say that the consensus mechanism is the soul of the blockchain.
Three mainstream consensus mechanisms of blockchain
PoW, PoS, and DPoS are the three mainstream consensus mechanisms of the blockchain, and they respectively represent the three key bookkeeping standards of the blockchain network.
1. Workload Proof Mechanism (PoW)
This type of consensus mechanism relies entirely on miners acting as nodes. They compete to solve complex cryptographic problems, and whoever completes the job first wins the right to discover the next block. In addition, “winners” are rewarded with newly forged digital currency.
(1) Advantages
The key advantage of PoW is to avoid hacking. Since this consensus model requires a large level of computation and effort, it is very difficult for hackers to alter the system. Even if they tried, the equipment, power and effort costs would outweigh the benefits. And because the block is nearly impossible to change, clients can be sure it maintains the authenticity and traceability of every transaction.
(2) Disadvantages
As blockchain technology becomes more advanced, it becomes more and more difficult to process hashes, and the whole process must involve more and more levels of computation. As a result, miners must employ expensive specialized hardware and consume large amounts of energy. On the other hand, such consensus mechanisms are associated with slow transaction rates. It can take more than ten minutes to verify a block and approve a transaction. At the same time, transaction costs are also very high.
2. Proof of Stake (PoS)
Proof of Stake is the second most popular consensus mechanism, which requires not the level of computation, but the ability to stake to verify blocks. Nodes must stake the blockchain’s native token to participate in the consensus process.
Networks often require a minimum number of tokens to become a validator, and if the validator is offline for too long, or if the validator engages in fraudulent behavior, some of the staked tokens may be lost.
PoS validators receive transaction costs as rewards. Validators for transactions are selected randomly, however, the probability of being selected is related to the total amount of staked coins. Proof-of-stake is seen as more cost-effective than proof-of-work because it must circulate digital currency rather than physical hardware, and uses little to no electricity.
(1) Advantages
In Proof of Stake, verifiers don’t need to buy expensive hardware, just use their regular PCs. Therefore, more people can afford to become nodes. The larger the node, the stronger the level of decentralization. Additionally, the consensus process is more energy efficient and provides faster transaction rates.
(2) Disadvantages
While each PoS-powered blockchain protocol has different rules and standards, most require validators to lock up a minimum amount of digital currency over a period of time. During this period, whether the digital currency falls or soars, you cannot “undo” and trade it.
Also, validators with larger stakes have more weight on the network, so they may have an outsized influence on transaction validation, which can also cause digital currency to accumulate.
3. Delegated Proof of Stake (DPoS)
Delegated Proof of Stake is an improved version of Proof of Stake. Delegates validating a particular block will be voted on by users, rather than random selection of validators, the one with the most staked coins will be chosen.
If a trustee is selected, stakers get a share of the total stake pool. The number of delegates per block is limited and randomized, allowing anyone to participate more fairly. In addition, the small number of delegates allows the consensus mechanism to run more smoothly.
(1) Advantages
The key advantage of DPoS is that instant voting allows for constant monitoring of network security. Once stakers detect malicious activity, they immediately vote for an anomalous delegate, who can be kicked off the network at any time. In terms of energy consumption, DPoS may be more energy-efficient and affordable than PoS.
The application of the delegated proof-of-stake mechanism also has a positive effect on transaction confirmation and execution speed. DPoS-based blockchains can perform between 2,000 and 8,000 transactions per second.
(2) Disadvantages
While the DPoS system has been lauded for its decentralized functionality and democratic approach, it is still possible to make the network more centralized. Should the trustees decide to coordinate their efforts by creating so-called cartels, transaction validation would depend on a small group of people, making the network biased and susceptible to malicious behavior.
Another issue is related to cybersecurity. Obviously, a good blockchain network needs a large number of users. The fewer people tasked with maintaining the network, the easier it is to organize a 51% attack – an attack that is possible when one person or group of people gains control over more than 50% of a blockchain’s hash power.
Speaking of this, I believe everyone has a certain understanding of the soul of the blockchain and its three mainstream consensus mechanisms. In general, at present, no consensus mechanism is perfect, and each has its own shortcomings. With the rapid development of blockchain technology, the consensus mechanism will gradually improve, and the future can be expected.
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