What are the Consensus Mechanisms? A complete understanding of the Consensus Mechanisms in the Block Chain

Question

If a group of fren go on a holiday and want to eat at a restaurant and watch a movie, everyone may have different opinions. At this time, everyone needs to decide through voting. The final choice with the most votes will be the Consensus for subsequent meals and movies.

In the world of blockchain, how to ensure that all participants can reach Consensus on transactions, data, etc. also requires a trap mechanism, and this trap mechanism is the so-called “Consensus Mechanism”.

What is Consensus Mechanism?

Consensus Mechanism (English: Consensus Mechanism) operates in a decentralized system or Block chain network, aiming to enable all participants of Nodes to reach Consensus on the correctness of data or transactions on the chain. This mechanism can be said to be the core element of Block chain technology, ensuring that the data in the network will not be arbitrarily tampered with, and the related transaction records ensure security.

If we take a centralized bank as an example, it is basically only the bank that confirms whether the individual's deposit, withdrawal, and transfer records are correct; but in the Decentralization Block chain network, there is no single intermediary authority to control or verify transactions. Instead, it is verified through Nodes in the network to ensure the authenticity of transaction records.

The official website of Ethereum (Ethereum) explains that the Consensus mechanism can ensure that Nodes on the network can reach Consensus on the authenticity and accuracy of transactions.

The history of Consensus Mechanism

The history of Consensus Mechanism is closely related to Block chain technology. With the development of Block chain, Consensus Mechanism also continues to evolve. The purpose of these mechanisms is to ensure that all Nodes in the Block chain network reach consensus on transaction data and maintain the security and Decentralization of the system.

The financial investment information website Investopedia focuses on the development history of consensus mechanisms.

1980s to 1990s: Centralized Database With the popularity of computers and the Internet, shared databases have emerged to allow users to access data from different locations. These databases are mainly centralized and controlled and maintained by specific administrators to ensure data integrity.

Mid-to-late 1990s: Distributed Storage and Processing Some shared databases have evolved into devices that distribute storage and processing capabilities to different locations. At this point, the issue of preventing data tampering and unauthorized access to data arises, and the automation of managing distributed databases begins to emerge.

The emergence of decentralized autonomous Consensus To solve the problem of database state consistency, decentralized autonomous Consensus was created. This method relies on encryption technology to verify the integrity of data by generating hash values. The hash value only changes when the input data is changed, so it can be used to ensure that the data has not been modified by comparing hash values.

2008: BTC and Satoshi Nakamoto's Contributions Although many people had been working on the Consensus Mechanism in the early days, the White Paper published by Satoshi Nakamoto, the founder of BTC, in 2008, is widely regarded as the foundation of the modern Blockchain Consensus Mechanism. For example, the Proof of Work mechanism (PoW) used by BTC addresses the Consensus issue in a Decentralization environment.

Why is Consensus Mechanism important for the development of blockchain?

The Consensus Mechanism plays a very important role in the Block chain technology, and it is used to ensure the network security, reliability, and core Decentralization of the Block chain. We have summarized several important reasons for Consensus Mechanism:

Maintain Decentralization

Ensure data consistency and reliability

Prevent duplicate payments and fraud

Improve network security

The core concept of blockchain is Decentralization. Zfort Group, an IT website, pointed out that the Consensus mechanism allows nodes to participate in the Consensus process, ensuring not only the absence of central authority intervention but also maintaining transparency and openness through a decentralized decision-making model to promote Decentralization.

The Consensus Mechanism can ensure that all Nodes have the same version of content to maintain data consistency and reliability. In addition, the Consensus Mechanism can also prevent the problem of duplicate payments on the blockchain. The Nodes on the network can verify the uniqueness of each transaction to prevent the same Crypto Asset from being spent multiple times, thus avoiding its use in online fraud.

The platform Crypto.com, which provides services related to Crypto Assets, explains that with the evolution of technology, consensus mechanisms have also evolved to include different designs such as Proof of Work (PoW) and Proof of Stake (PoS), to prevent malicious attackers from controlling the Block chain network. These designs require participants to invest in electricity, or Crypto Assets and other resources for verification, making it expensive and difficult to achieve, and reducing the likelihood of a successful attack.

What are the Consensus Mechanism?

Consensus Mechanism is the core of the blockchain system, ensuring the consistency of relevant transaction data among all Nodes. Here are some common types of Consensus Mechanism.

Proof of Work (Proof of Work, PoW)

PoW is the earliest used Consensus Mechanism. PoW requires participants (Miners) to solve complex mathematical problems through calculations to verify transactions and generate new Blocks. The advantages of PoW Consensus Mechanism are high decentralization and security. Actual application cases include BTC, DOGE, Litecoin and other cryptocurrencies.

However, due to the high energy consumption required for computer calculations, it is energy-intensive and less environmentally friendly. When more people use it, the speed may be slower, and a higher Gas fee may be required.

Proof of Stake（Proof of Stake，PoS）

PoS selects validators through holding and staking Cryptocurrency, rather than relying on computational power. Therefore, people who hold more Tokens have a higher chance of being selected to validate transactions.

The advantage of PoS is that it is not so energy-consuming, but the disadvantage is that it is more likely for people with more Cryptocurrency to participate in verification, which may lead to PoS being less Decentralization. Use cases include Ethereum (which used PoS in the early stages) and Cardano after 2022.

Delegated Proof of Stake (DPoS)

DPoS is an improved version of PoS, which allows network participants to verify by selecting "representatives" through voting. This improves the efficiency and speed of the system, but the downside is the potential risk of centralization, as a few representatives may control more power. DPoS is applied in projects such as EOS and Tron.

encryption The most common 3 consensus mechanisms are summarized in the comparison table here.

Features Proof of Work PoW Proof of Stake PoS Delegated Proof of Stake DPoS Energy Consumption High and Low Need for Mathematical Operations, High Energy Consumption Compared to PoW, Energy-efficient Highest Security, but Vulnerable to 51% Attack Security, but may have centralization risk for those who hold more cryptocurrency Security, but may lead to centralization risk for elected representatives Decentralization High Decentralization Low Consensus Process Miners verify transactions by solving complex mathematical problems Validators are selected to verify transactions based on the amount of staked tokens Representatives are selected by network participants to verify transactions. Main Use Cases BTC, DOGE, Litecoin Ethereum, CardanoEOS, Tron after 2022

Data source: Crypto.com, Zfort Group, Built In

Source: "Encryption City" mapping What are the Consensus Mechanisms?

The above three Consensus Mechanisms are the most common ones. The other three Consensus Mechanisms are proof of authority, burning proof, and historical proof, which will be explained separately below.

proof of authority（Proof of Authority，PoA）

PoA is a mechanism that selects validators based on their reputation, rather than the digital assets they hold. Built In, a website focused on technology content, pointed out that in the PoA mechanism, there is usually a background check and review process, and it is favored by private blockchains because of its high efficiency. It is usually used in enterprise environments, such as the JPMCoin of the financial industry's JPMorgan Chase and the VeChain supply chain management platform, both of which use the PoA Consensus Mechanism.

Proof of Burn (PoB)

Crypto.com, a platform that provides cryptocurrency-related services, stated that PoB requires participants to 'burn' a certain number of tokens to obtain the power to validate blocks, which also means that the tokens will be permanently destroyed and cannot be used again. PoB is seen as an energy-saving alternative to PoW and is suitable for Factom, a blockchain platform that focuses on data management and security.

Proof of History（Proof of History，PoH）

PoH is a relatively new Consensus Mechanism designed to improve Block chain efficiency. According to Crypto.com, PoH relies on timestamp technology to sort events, allowing the network to verify transactions at a faster pace. Currently, it is only applied by Solana, but has not yet undergone large-scale testing.

The future of Consensus Mechanism

Overall, the future Consensus Mechanism will be more diverse, focusing on energy efficiency, Decentralization, security, and privacy protection. The new Consensus Mechanism will also continue to evolve to meet the needs of different application scenarios.

With the increasing attention to environmental protection worldwide, the existing Consensus Mechanism, especially Proof of Work (PoW), has been widely criticized for its high energy consumption. Future Consensus Mechanisms will pay more attention to energy efficiency and reducing energy consumption, which will help address environmental challenges and improve technological sustainability.

Future consensus mechanisms will strive to achieve a better balance between decentralization and security, preventing excessive control of the network by large holders or a small number of validators. As explained, mechanisms like Proof of Stake (PoS) may reduce the risk of concentration by increasing randomness or introducing community-based attestation methods, thus achieving a higher level of decentralization and fairness.

With the advancement of technology, the Consensus Mechanism may adopt a hybrid mode in the future to combine the advantages of different mechanisms for optimal results. Zfort Group also pointed out that a hybrid Consensus Mechanism combining Proof of Work (PoW) and Proof of Stake (PoS) has been applied in some Block chain projects, which can ensure security and improve efficiency.

With the expansion of the blockchain technology application scope, the future Consensus Mechanism will become more specialized, designing corresponding solutions for different application scenarios. For applications such as the Internet of Things (IoT), low latency and high-efficiency Consensus Mechanism may be required; while financial applications will emphasize security and the immutability of data. This development will make the Consensus Mechanism more flexible and able to meet the different needs of various industries.