Consensus Algorithms in Blockchain – Part 1

CornerRight 2 min


Icons/Position/Pos. No. 1

Blockchain


Icons/Technology/Tech No.1

AI

Bitcoin mining consumes as much power as Ireland. Where does that power go? The answer is quite silly: it’s basically solving mathematical riddles.

The energy is used by the consensus algorithm of Bitcoin – and this huge amount of electric power flowing through the nodes authorizes the blocks.

What is consensus algorithm in blockchain?

Consensus algorithm is a mechanism that validates the new blocks in the blockchain. It exists to protect transactions and prevent double spending.

There are various approaches to this problem. Here are some of them:

Proof of work (PoW)

Proof of work consensus algorithm means “classic mining” used in Bitcoin and Ethereum. The validator for blocks is sheer power (well, with a bit of probability) put into solving a cryptographic challenge.

It is basically a fence that protects the blockchain from attacks. If you want to exploit the blockchain, you have to generate equal power.

If you’ve seen cryptocurrency mining stations, you know what it means. A set of expensive graphics cards (getting even more expensive because of mining) combined with enormous power consumption, heated by solving mathematical mysteries. There are actually platforms that you can use as radiators at home – that’s how hot they get.

It’s expensive and ineffective. That’s why Proof of Work algorithm is slowly becoming obsolete, with new solutions rising on its way – for example, Ethereum is migrating to a proof of stake solution.

Proof of stake (PoS)

As the second most popular algorithm of consensus, it’s significantly more efficient. The miners do not have to solve useless crypto puzzles to prove their engagement – the stake (part of their tokens) they bet on the new block is enough to accept it.

The common issue is “nothing at stake” problem, meaning that in a pure PoS solution there’s no motivation to play fair during the voting process on forks. This fact can decrease the credibility of the ledgers.

There are few more weak points in this, but with a proper additional logic and rules, they can be reduced – such as in the case of new Casper algorithm in Ethereum. With a cleverly constructed PoS based blockchain, attacks are more expensive, while the algorithm saves a huge amount of energy.

Similar blog posts

10 Common Software Architecture Patterns: Expert Guide

8 min

Did you know that before starting a software development project, an architect needs to pick the software architecture for it? This is a common best practice in the tech industry that allows teams to make the most out of the software and create a better experience for users.

Wed/Mar/2022
see details

12 Interesting Blogs on Blockchain & Cryptocurrencies

3 min

It’s not easy to find a reliable and friendly source of information on blockchain technology. To help you reach some of the best, we’ve aggregated the top blogs related to the topic, which can extend your view on blockchain & cryptocurrencies.

Thu/Jun/2018
see details

4soft Use Cases: Blockchain In E-Commerce

4 min

E-Commerce thrives. Online sales steadily grow by about 20% every year. To sustain this growth, online shops leverage every possible technology that helps them to be more efficient and get ahead of the competition to sell more, faster and at better prices.

Tue/Feb/2020
see details

A comment on Facebook cryptocurrency – GlobalCoin

3 min

This month has been very interesting and revealing in the topic of “Facebook cryptocurrency.” The Zuckerberg’s platform lifted the ban on crypto and blockchain advertisements, and there’s a reason for that – it prepares to introduce their own solution, and it will come to live faster than you might expect.

Thu/May/2019
see details