An Overview of Consensus Protocols in Blockchain Technology
 |
| Blockchain Consensus Protocols |
One of the most important elements of blockchain technology is the consensus protocol. This protocol is used by all blockchains to reach an agreement on the state of the system and order transactions. Consensus protocols are at the heart of distributed systems, such as public ledgers (blockchain), anonymous peer-to-peer networks (Bitcoin), distributed cloud storage systems (Sia) and many others.
In this article, we will discuss what a consensus protocol is, how it works and why it's so important for blockchains.
What is Blockchain Technology?
Blockchain is a distributed ledger technology that creates an immutable record of transactions. It was first used to create Bitcoin, but there are many other blockchains, such as Ethereum. Blockchain is being used in many industries including financial services and healthcare.
Blockchain technology has become widely known in the last few years, especially since the Bitcoin price skyrocketed in 2017. There are a couple ways cryptocurrencies can come to consensus about what block is next, and which transactions should be included in that block.
Define Consensus Protocol in Blockchain
Consensus protocol is a core part of blockchain technology. It refers to the rules that participants in the network must follow to make sure that all nodes involved in the system reach an agreement on each transaction. In other words, it's how blockchain reaches trust and security.
Consensus protocol has a big impact on the crypto price, including the Ethereum price. This is because they affect the mining difficulty and mining costs. When the mining difficulty is high, it's hard to mine coins. The number of miners will decrease. As a result, the hash rate will decrease too, which will make it harder for a new block to be mined, so even if more transactions are made, it may take a long time for them to be verified.
This means that if consensus protocol is not good enough, people will only stop using cryptocurrency in the future because of its instability due to low usage frequency, which is bad for any coin.
Types of consensus protocols
Proof of Work
Proof of work is a consensus protocol that requires nodes to solve a complex mathematical problem in order to create new blocks. It's the most popular consensus protocol used in blockchain technology, and it was first introduced by Bitcoin's anonymous creator Satoshi Nakamoto.
In proof of work (PoW), miners compete against each other to find a solution for the next block on the blockchain. This process involves calculating an extremely difficult hash value. One that fits certain requirements from all of the transactions contained in that block.
Proof of Stake
Proof of stake (PoS) is a type of algorithm that allows for distributed consensus to be reached by validators. In proof-of-work systems, miners are required to solve complex mathematical equations in order to validate transactions and create new blocks on the blockchain.
If a validator correctly adds a block at any point during this lottery, then they will receive all transaction fees associated with that block plus an additional reward proportional to how much money they staked versus everyone else who participated in this lottery round (up until now).
The main benefit of PoS over PoW is its lower energy consumption because mining rigs don't need expensive hardware like GPUs anymore. Instead anyone who owns cryptocurrency can become part of their network simply by owning some coins themselves.
Proof of Space
Proof of Space is a consensus protocol for distributed ledgers. The basic idea behind Proof of Space is that each node in the network (each individual computer or server) provides some amount of computational resources as proof of their ownership over the network.
This means that every node has to have a certain amount of disk space, and they must prove that they own that space by adding a small amount of data to the blockchain. The more space they provide, the more weight they have in the consensus process.
This is particularly relevant because it allows different types of nodes to be weighted differently: lightweight nodes can run on low-end hardware and provide very little storage space, while high-end nodes can store massive amounts of data and provide thousands of times more weight to their owners than lightweight nodes do.
Proof of Elapsed Time
Proof of elapsed time (PoET) is a consensus protocol that uses the passage of time to reach consensus. In PoET, each node in the network is given an opportunity to produce a block in an equal amount of time. The block produced by each node is then time stamped by its own clock and broadcasted across the network for other nodes to verify its validity.
If multiple nodes produce blocks during their allotted time slots and broadcast them simultaneously, then all but one of those blocks will be discarded as invalid by other nodes on account of having been created too soon after another block had already been created before it could be verified by everyone else in the system (and therefore considered valid).
The advantage here is that elapsed time cannot be tampered with; unlike traditional systems like proof-of-work where miners can manipulate their hardware clocks or even just lie about how much computing power they have available at any given moment.
What is the Importance of Consensus Protocol in Blockchain?
Consensus protocol allows people to agree on something. If a group of people are going to do something together, they need to agree on how they're going to do it.
Consensus protocols allow people to do this without having to argue about it endlessly.
It is a solution that ensures that the data shared among nodes in a distributed network always match. In its simplest form, it's the process of how blocks are added to the blockchain.
These protocols are the bedrock of blockchain technology, and are a necessity for any application that requires multiple parties to agree on the validity of transactions or documents.
Consensus protocols help to ensure that all parties in a transaction have a consistent view of the state of the blockchain and that there's no single point of failure, such as a centralized government or institution, which can easily be corrupted or fall victim to internal disputes.