Blockchain is a decentralized network that comprises of network participants more commonly known as nodes. In order to ensure that all the participants agree on a common state of the network or the distributed ledger as well as what data is permitted into the network via blocks, there needs to be a defined mechanism that is real-time, efficient, secure, and fault-tolerant. This is what is known as the Blockchain consensus mechanism and is pretty much the core of a blockchain network.

The consensus mechanism defines most of the key characteristics of the blockchain network, including throughput, finality, scale, etc. As such it is important to understand the different types of consensus mechanisms that are employed for powering different blockchain networks. We will learn briefly about a few of them here -

Proof of Work (PoW) - This is arguably the most popular consensus mechanism that is used in the Bitcoin, Litecoin, and Ethereum (so far!) networks among others. Here, to incorporate a new block into the ledger, the participant nodes need to solve a complex mathematical function. This is what is termed as the work that needs to be done and the proof is cryptographically embedded in the solution. The computational difficulty of the problem is typically adjusted to ensure higher security. The key argument against proof-of-work is that it consumes a tremendous amount of energy that may not be sustainable.

Proof of Stake (PoS) - In the proof-of-stake mechanism, the validators for new blocks are typically chosen in proportion to the amount of cryptocurrency/token that these participants own or have staked. They are able to avoid the computational complexity of proof-of-work systems thereby being more energy-efficient. Some notable blockchains that utilize the Proof-of-stake mechanism are Cardano, Algorand, Tezos. Ethereum network is also currently moving to a PoS based system from PoW.

Byzantine Fault Tolerance (BFT) - This is another consensus mechanism that is based on the Byzantine General’s Problem. It outlines a fault tolerance mechanism that ensures network reliability even if a certain number of participants turn bad actors. There are variations to BFT like Practical BFT (PBFT) and Delegated BFT (dBFT). NEO is one of the blockchain networks that utilize dBFT consensus mechanism.

Proof of Burn (PoB) - This is another consensus mechanism where the block validators are chosen based on the amount of coins/tokens that are burned by them. Tokens are usually burnt by sending them to an inaccessible or invalid address thereby losing access to them forever. This indicates an investment into the network by the participants as they let go of the tokens in order to validate newer blocks into the ledger.

Proof of Capacity (PoC) - Proof of Capacity is a consensus system that is based on the amount of storage or capacity that a particular participant brings to the table. This is achieved by utilizing the storage available for storing possible solutions to the mining problem. Signum is a blockchain that employs Proof of Capacity consensus mechanism.

Proof of Elapsed Time (PoET) - Proof of Elapsed Time is a system that is based on a fair lottery system where a random wait time is assigned to the blockchain participants. after which they can introduce new blocks to the ledger. The random distribution ensures that each node gets an equal chance in the validation process.

Proof of Activity (PoA) - Proof of Activity is considered a hybrid between PoW and PoS mechanisms and tries to utilize the best aspects of these systems. The mining process starts in a similar fashion as PoW and then switches to the PoS mode for validation. Decred is a blockchain network that utilizes Proof of Activity consensus mechanism.

The above was a brief summary of various consensus mechanisms and blockchain networks utilize different variations of these or sometimes even a combination of these and others to keep the system trustworthy.

Hope you liked this introduction to the world of Blockchain consensus and it helped you to understand what goes on behind the scenes in these networks. Let us know if we missed any as well as which is your favorite consensus mechanism.