Before the advent of the Bitcoin blockchain, there were many attempts to create a separate payment system. But all failed, as engineers failed to resolve the issue. That is, a way to reach an agreement between all the participants in the network and ensure its effectiveness. Using popular consensus algorithms as an example, let’s look at how they work and how an agreement is reached in a blockchain.
The Proof-of-Stake process is very similar to voting among the company’s shareholders – the one with the most shares wins the most power. Therefore, it is not a question of the number of votes, but of their weight.
The advantage of the algorithm is the motivation for faithfully verifying the transaction. What’s worse is that it’s actually hard to create a PoS-based system that will take into account all the possible negative aspects of participants’ behavior.
“There are obvious scalability limitations in Bitcoin, routed directly to the Proof-of-Work consensus algorithm. With increasing concerns on environment preservation and conservation, alternate consensus algorithms must be designed,” says – Bohdan Prylepa, CTO of Prof-it Blockchain Ltd and COO in Bitcoin Ultimatum. He also mentioned, “I’m particularly interested in the one that places the end-use at the center. There are several models present, but the one that combines Leased Proof-of-Stake (PLoS) and Proof-of-Authority (PoA) dubbed UPoS appear robust without compromising security or impacting decentralization.”
In PoW, 51% of attacks are theoretically possible, although they mean nothing to hackers. In the PoS system, attacks can occur if more than half of the participants go down on their own in secret.
To date, there is no safe and secure PoS-based method, everything is being built.
At the same time, Ethereum developers are currently trying to combine the benefits of PoW and PoS using Casper’s protocol.
The main idea of Delegated Proof-of-Stake is that each user can vote for representatives – those who authorize the transaction. Representative identity is known beforehand. They can be influential people who are known for their success in the blockchain field.
It is important to know that the system takes into account the weight of the votes. The more a voter gets the local (internal) money, the greater the influence on the “election”.
Consensus usually means a way of agreeing. In the blockchain, a system allocation system that does not have a single governing body, various algorithms have been developed to achieve consistency.
In a blockchain network, it does not matter whether the participants in the system trust each other or not. They must agree on specific terms of service that will apply to everyone. And this is a direct function of the consensus approach.
The consensus for algorithms in blockchain is a set of rules and specific mathematical functions that allow to reach agreement between all participants and ensure network performance. There are various ways to reach an agreement.
The definition of proof of performance lies in the word itself – Proof of employment. To participate in the verification of transactions, participants need to publicly verify the work done. This law prohibits attacks on the system if the attacker creates fake voters. When the job is done, there is a good chance they will produce the next block and win a prize. However, it is important to note that these are just opportunities, not the general rule.
PoW is considered the simplest and at the same time the most stable algorithm in the context of absolute and anonymous power supply.
Proof of Value (PoI) algorithm for consensus which is an extended form of PoS. In addition to looking at the number of participants with financial resources, the algorithm analyzes the behavior of participants. For example, coins are transferred where, when and how In this way, the situation is removed only when the richest people get rich.
The Multisignature Agreement with the Byzantine Fault Tolerance should be considered together. They are used to reaching an agreement between a limited group of people. In the case of Multisignature, these were only a few participants, in the Byzantine Fault Tolerance, a large number. Tolerance of Byzantine Mistake only makes sense when all parties know each other.
The Federated Byzantine Treaty came into effect on Ripple and was later developed by Stellar. The machine allows access to an agreement between a large number of participants, the total number of which is unknown.
Each participant trusts a limited number of other participants, forming a “trust circle” where they can easily reach an agreement. Finally, there are many “hope circles” that somehow allow for a full agreement across the network.
Of course, there are no perfect algorithms and no universal way to reach an agreement on a system enabled or partially enabled. Each method has its advantages and disadvantages. That is why algorithms are constantly being updated and added.
Engineers delight in mastering the word of God. And we can only be happy about this, because blockchain without compliance, like a smartphone without an Internet connection, makes no sense.