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Consensus Mechanism in Blockchain

Content

  • Introduction
  • What is Consensus
  • Types of Consensus Mechanism
    • Proof of Work (PoW)
    • Proof of Stake (PoS)
    • Proof of Elapsed Time (PoET)
  • References

 

Introduction

In my earlier posts, I have discussed consensus mechanism multiple times with the example discussed below. In this blog, we will also discuss some of the widely used consensus mechanisms. Before we start with Consensus Mechanism, please read What is Blockchain?

 

What is Consensus

The literal meaning of consensus is “A general agreement”. As the meaning suggests, a consensus in a Blockchain is a mechanism of validating a transaction based on general agreement (agreement of more than 51% miners in Bitcoin).
For example, Gargi sends $100 worth of Bitcoin to Rudra, Gargi will lose 100$ worth of Bitcoin from her wallet, and Rudra will gain 100$ worth of Bitcoin in his wallet. But it needs to be validated and verified that if Gargi had 100$ worth Bitcoin in her wallet or not. This is validated by the miners in the Blockchain and if more that 51% miners agreed upon this transaction, then only the transaction will be validated.

 

Types of Consensus Mechanism

There are multiple types of consensus, we will discuss the few and widely used consensus mechanisms:

  • Proof of Work (PoW)

As discussed here, the process of finding nonce is available for everyone and it will be achieved earlier by the one who has better computational power (because of higher probability to guess). This way of validating a block in Blockchain where the work (here nonce guessing) is considered as a proof of validation is termed as Proof-of-Work. This mechanism is used in Blockchain based cryptocurrencies like Bitcoin.

  • Proof of Stake (PoS)

As discussed here, the process of finding nonce will be achieved earlier by the one who has better computational power. This could result in a monopoly of rich and could lead the monopolist to impose conditions on the rest of network. And if this monopolist has malicious intentions, then it could lead low confidence in Bitcoin. To overcome this issue, a consensus mechanism was designed in such a way that the forger/validator will have to keep an amount of crypto currency as a stake and will be probabilistically assigned a chance to be the one validator and create new blocks. This too provides a monopoly to rich as they could stake more and will have high probability to become validator. As stake can be forfeited if fraudulent validations are made, hence it seems safer than PoW. This mechanism is used in Dash, NEO and PIVX.

  • Proof of Elapsed Time (PoET)

In 2016, Intel identified the issue of very high resource utilization and energy consumption in current consensus mechanisms. To solve this issue and serve the purpose “cost should remain proportional to the value derived from the process”, Intel brought Proof of Elapsed Time. In this mechanism, each participating node of a permissioned Blockchain are assigned random waiting time. The one with lowest waiting time wins the opportunity to become a validator. This is more like a lottery type. This mechanism is used in Hyperledger.

 

References

https://blogs.sap.com/2019/01/14/what-is-a-block-in-blockchain/

https://www.researchgate.net/publication/330367578_A_Tryst_Of_ERP_With_Blockchain

https://www.sap.com/india/products/leonardo/blockchain/what-is-blockchain.html

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