Blockchain has changed people’s perspective of a completely decentralized financial market since its inception, which blockchains have achieved by using consensus algorithms. So what is the consensus algorithm? Join Weakhand to learn about the consensus mechanisms that decentralize a blockchain in this article.
What is the Consensus Algorithm?
The consensus algorithm in blockchain is a mechanism for synchronizing data across a distributed network consisting of many different nodes. It is used to ensure data consistency between network nodes in the blockchain system.
The consensus algorithm ensures that new transactions and blocks are confirmed and added to the blockchain in a certain way and that independent copies of the blockchain are synchronized with each other. No individual or organization can change data in the blockchain network by inserting a new block into the network without the consensus of the remaining nodes.
Therefore, the consensus algorithm plays an important role in ensuring data integrity and preventing problems such as fraud or cyber attacks.
Consensus Algorithms and Intimacy with Crypto
Consensus algorithms and crypto are closely related because crypto systems (especially cryptocurrencies like Bitcoin) depend on consensus algorithms to validate transactions and ensure consistency and synchronization. in the blockchain.
In blockchain networks, nodes must use consensus algorithms to synchronize data and confirm transactions in the system. For example, Bitcoin uses the Proof of Work (POW) algorithm as a consensus mechanism to validate transactions and create new blocks.
The importance of the consensus algorithm in crypto lies in its ability to ensure the integrity and safety of data between parties in the system. If a transaction is not properly confirmed, it can result in loss of funds or fraud. Therefore, the use of accurate and efficient consensus algorithms is essential to ensure that the cryptocurrency system is stable, trustworthy, and reliable.
Development History of Consensus Algorithm
The consensus algorithm has a long development history. In the earliest years of computer technology, consensus algorithms were used to synchronize programs running on many different computers.
However, with the development of distributed technology, consensus algorithms have been widely applied in distributed networks, including the internet. Consensus algorithms play an important role in synchronizing data and handling consistency-related issues.
In the field of cryptocurrency, consensus algorithms became especially important when Bitcoin was launched in 2009. Bitcoin uses the Proof of Work (POW) algorithm to confirm transactions and create new blocks in its blockchain.
However, POW has gradually become ineffective because of energy consumption problems. Therefore, many different solutions have been proposed including Proof of Stake (POS), Delegated Proof of Stake (DPOS), and Proof of Authority (POA) consensus algorithms, to improve user experience in blockchains. blockchain in general.
Through ups and downs, consensus algorithms remain an important part of ensuring the consistency and stability of distributed networks, especially cryptocurrency systems and blockchains.
The Impossible Trinity Must Be Solved
The impossible trinity is an unsolved problem of all blockchains including:
- Security.
- Decentralization.
- Ability of extension.
With each consensus mechanism, it can only solve a maximum of 2 out of 3 proposed problems such as PoW, which has very poor scalability but is secure and decentralized, while blockchains use the DPoS mechanism. Security and expansion cannot be decentralized.
Universal Consensus Mechanisms
Proof of Work
Proof of Work (PoW) is a term in the blockchain field to describe the complex decryption process to mine new blocks in the blockchain chain.
The history of PoW began in 1993 when cryptographer Cynthia Dwork and colleagues introduced the idea of ”proof-of-work puzzle” to solve the problem of “spam” in email systems. Then, PoW is used to prevent DDoS attacks in network systems.
In 2009, blockchain technology and the Bitcoin cryptocurrency were born and used PoW as a method to record transactions and add new blocks to the blockchain chain. PoW in Bitcoin requires miners to solve complex arithmetic problems to find a hash value that must be less than a certain standard threshold. The process of finding such a hash value requires energy and computation consumption by miners.
Later, PoW was also used in other cryptocurrencies such as Ethereum, Litecoin, and Bitcoin Cash. However, due to the huge consumption of energy and computing resources, PoW has become a weakness of blockchain and is being researched to find other better methods.
Proof of Stake
Proof of Stake (PoS) is a term in the blockchain field to describe the process of introducing new blocks in the blockchain chain based on the manipulation of participants’ own tokens to prove their trustworthiness.
The history of PoS begins in 2011 when blockchain developer Sunny King introduced the term “Proof of Stake” and launched the first version of the Peercoin system. PoS in Peercoin allows miners to earn more revenue based on the number of coins they own, instead of having to solve complex math problems like in Proof of Work.
Miners in a PoS system are called validators and do not need to solve complex algorithms to create blocks from saving on electricity costs and do not need to have very powerful hardware. strong.
Currently PoS has become one of the most popular consensus mechanisms in blockchain, used by various networks such as Ethereum, Cardano, Polkadot and Cosmos.
Proof of Authority
Proof of Authority (PoA) is a consensus algorithm used in blockchain, in which administrators are predetermined as nodes and are considered highly trustworthy to confirm transactions.
PoA was first introduced in 2017 by Kovan Testnet and Parity Tech. It is developed based on Proof of Stake (PoS) but with the important difference that instead of evaluating the trustworthiness of nodes by the number of collateralized tokens, PoA evaluates nodes based on the identity of the administrator. treat.
PoA is commonly used in private networks and has faster transaction processing speeds than Proof of Work (PoW) and PoS. However, it has some limitations, including a limit on the number of allowed nodes, as well as trust based only on the administrator’s identity, which can lead to security issues if the administrator dishonest treatment.
Delegated Proof of Stake
Delegated Proof of Stake (DPoS) is a consensus algorithm used in blockchains such as EOS, BitShares, and TRON.
In DPoS, capital contributors are chosen as delegates to confirm transactions and create new blocks. They are responsible for ensuring the integrity of the blockchain by using their voting power to apply rules for transactions and new blocks.
The DPoS algorithm was first proposed by the BitShares consortium in 2014 and was later used in many other blockchain systems. DPoS has attracted the interest of the blockchain community because it can solve some of the problems of Proof of Work (PoW). DPoS enables faster transaction processing speeds, more energy savings, and minimizes the centralization of power in blockchain management.
Benefits of Using Consensus Algorithm in Blockchain
Using a consensus algorithm in blockchain has the following benefits:
- Safety and reliability: consensus algorithm helps ensure data integrity and avoids fraud attacks.
- Feasibility and cost savings: the use of a consensus algorithm helps limit damage from attacks and minimizes the costs of maintaining the network.
- Decentralization: the consensus system is built on a decentralized mechanism, which helps prevent the concentration of resources and power.
- Trust and transparency: consensus algorithms in the blockchain allow all users to transparently view and audit transactions on the blockchain, increasing trust and control.
Limitations of Using Consensus Algorithm in Blockchain
Some limitations of using consensus algorithms in blockchain include:
- Processing speed: Processing and confirming transactions on the blockchain takes a long time and consumes a lot of computing power because it must go through the consensus process of the entire network.
- Number of transactions: as the number of transactions on the blockchain increases, the consensus process can become slower and more expensive.
- Threat from attacks: if some miners tamper or attack the network, they can cause errors in the consensus process and affect the integrity of the blockchain.
- Difficulty in development: consensus algorithms require careful construction to ensure the safety and reliability of the blockchain. This requires a high level of expertise and can slow down the development of new blockchain projects.
Summary
The prospect of consensus algorithms in blockchain is great thanks to blockchain’s ability to increase transaction processing speed and minimize costs incurred during implementation. In addition, consensus algorithms can be developed to apply to fields other than blockchain, such as information security, financial and travel transaction processing,… to improve safety and security. convenience in human activities.
Above is the information you need to know to understand what the consensus algorithm is. Weakhand hopes that through this article, everyone will find useful information for their research process.
