Explore three different consensus algorithms, comparing their tenets, advantages, and disadvantages, while also going into how they have influenced the development of open source blockchain ecosystems.
Consensus algorithms allow blockchain networks to operate safely and reliably. In a decentralised network, these algorithms guarantee that all users concur on the blockchain’s present state. Three consensus mechanisms have become popular in the context of open source blockchains: Byzantine Fault Tolerance (BFT), Proof of Work (PoW), and Proof of Stake (PoS).
Consensus in blockchains
The protocols that allow blockchain networks to agree on a single data value or version of the blockchain are known as consensus algorithms. The decentralised ledger’s continuity, security, and integrity are all vitally dependent on them. The decentralised nature of blockchain would not be feasible without consensus, potentially resulting in vulnerabilities and inconsistent data. Data is updated and maintained by a single person (such as a database administrator) in conventional centralised systems. Decentralised systems, on the other hand, do not need a central authority because they rely on consensus processes to guarantee that all participants agree on the authenticity of the data.
Decentralisation, security, fault tolerance and consistencies are vital characteristics of consensus algorithms.
Decentralisation
Here, a central authority is not required to verify transactions. Authority, control, and data are dispersed throughout a network as opposed to being centralised in one organisation or person. Decentralisation eliminates single point of failures.
Multiple autonomous nodes take part in a decentralised consensus method, which makes it resistant to attacks or failures of individual nodes. Decentralisation also enhances trust and transparency. No single party controls the data in decentralised consensus techniques, and the entire procedure is open and verifiable.
Security
Data integrity is preserved and the network is protected against malevolent attacks. To maintain data integrity and safe communication, consensus systems mostly rely on cryptographic techniques.
Fault tolerance
This is a crucial component of consensus algorithms in blockchain systems, and makes sure the network keeps running even if some nodes are hostile or malfunctioning. Achieving consensus in a decentralised setting necessitates strong fault tolerance techniques because nodes may malfunction, act maliciously, or behave inconsistently.
Consistencies
All trustworthy nodes in a distributed network concur on the same blockchain state. The correctness and integrity of the data being transferred throughout the network are ensured by this essential component of blockchain systems.
Byzantine Fault Tolerance (BFT)
This consensus method can reach a consensus in a distributed system even if up to a third of the nodes malfunction or behave maliciously. It deals with the Byzantine Generals Problem, in which nodes must agree even while some of them are giving false or inaccurate information. Nodes (or replicas) in BFT systems communicate with one another to confirm transactions and reach a consensus over the state of the system. Even if some nodes are hacked or flawed, more than two-thirds of the nodes must concur on the same outcome in order to agree. Practical Byzantine Fault Tolerance (PBFT), one of the practical applications of BFT, improves efficiency by lowering the required number of communication rounds.
BFT’s fundamental benefits are its great resilience and dependability, which allow it to maintain consensus even in the face of malicious activity or node failures. Because of its resilience, BFT is perfect for crucial applications with low levels of trust, such as permissioned blockchains and financial systems. Since BFT doesn’t require as much processing power as Proof of Work (PoW), it is more energy-efficient and appropriate for systems with known or semi-trusted nodes. BFT algorithms are effective for real-time applications because they can execute transactions with low latency and high throughput.
BFT does have certain drawbacks, though, chief among them being scalability. It is not feasible for big, decentralised networks, since the quantity of messages sent between nodes increases quadratically with network size. BFT is more suited for permissioned blockchain settings than open, decentralised ones like Bitcoin because of this constraint. In highly hostile contexts, the assumption that less than one-third of the nodes are compromised presents another difficulty. Furthermore, putting BFT into practice can be challenging, requiring exact synchronisation and communication between nodes. BFT is still a key idea in distributed computing despite these difficulties, and has been modified in several blockchain implementations, like Hyperledger Fabric and Tendermint, to guarantee consensus with a predetermined group of participants.
Proof of Work (PoW)
This is the oldest and most popular consensus algorithm, made popular by Bitcoin. Miners must solve cryptographic challenges to validate transactions and append new blocks to the blockchain. The right to attach the block and earn a reward belongs to the first miner who solves the problem. There are basically six steps in this algorithm. The first step is the transaction pool where users make transactions, which are collected into a memory pool of unconfirmed transactions. Miners choose transactions from this pool to include in a new block. In the second step, the miner creates a block with various parameters. In the third step, a valid hash that meets specific criteria is found, and it starts with a certain number of leading zeroes. If the hash doesn’t match, the miner changes the nonce and tries again. In the fourth step, the correct solution is found by trial and error. Once found, the miner broadcasts the new block to the network. In the fifth step, block verification and broadcasting are done. If valid, the block is added to the blockchain and all nodes update copies to accommodate new nodes. In the sixth step, the new block is propagated throughout the network. The miner starts working on the next block using the hash of the current block as the previous hash.
PoW’s main advantages are its security and resilience. Because it takes a lot of computing power to solve the cryptographic challenge, it becomes unaffordable for bad actors to change the blockchain, guaranteeing data integrity and decentralisation. Furthermore, regardless of the network’s processing capacity, consistent block times are guaranteed by the difficulty adjustment algorithm. Because of this feature, PoW is extremely resilient to Sybil attacks, in which one party attempts to take control of the network.
However, PoW has quite a few problems, the most important being the energy it uses. Because only companies with substantial financial resources can compete, mining necessitates specialised gear (such as ASICs), raising worries about centralisation. There are environmental issues too, since the processing power used during mining does little more than secure the network. As only one miner eventually receives the reward, the competition among miners results in wasted energy utilisation.
Proof of Stake (PoS)
PoS seeks to preserve network security and decentralisation while addressing the energy inefficiencies present in Proof of Work (PoW). Based on how many coins they own and are prepared to “stake” as collateral, validators—rather than miners—are selected to produce new blocks and validate transactions under PoS. Validators are chosen according to their stake and occasionally by other criteria, such as randomisation, rather than by solving computational challenges. Following selection, a block is proposed by the validator, and its validity is decided by the other validators. The block is put to the blockchain, and the validator receives incentives if the validation is successful.
Compared to PoW, PoS is more environmentally benign because of its energy efficiency, which removes the need for power-hungry mining activities. This also lowers the risk of centralisation by facilitating a more accessible and democratic consensus process. Furthermore, because block production is independent of solving intricate puzzles, PoS networks can achieve faster transaction processing and scalability. Since obtaining the majority stake is unfeasible and ineffective, PoS also naturally deters attacks like the 51% attack.
The ‘Nothing at Stake’ problem, in which validators may validate several conflicting blocks for free, jeopardising network integrity, is one of the difficulties PoS faces. Some PoS solutions include penalties for signing numerous chains. Wealth buildup can also result in centralisation, since it can monopolise block validation because users with higher stakes have more clout and continue to receive greater rewards. As early stakeholders potentially control the system, PoS also needs a safe way to start the network and select validators equitably. Despite these difficulties, PoS is frequently used in contemporary blockchain networks (such as Cardano and Ethereum 2.0) due to its low processing requirements and sustainability.
Table 1 compares the vital parameters of the three consensus algorithms we have discussed here.
| Parameter | Byzantine Fault Tolerance (BFT) | Proof of Work (PoW) | Proof of Stake (PoS) |
| Consensus method | Message exchange | Mining by solving complex puzzles | Staking coins to become validator |
| Energy efficiency | High | Low | High |
| Scalability | Moderate | Low | High |
| Security | Moderate | High | High |
| Risk of centralisation | Low | Medium | Medium |
| Speed | High | Low | High |
| Complexity | High | Moderate | Moderate |
| Cost | No mining reward, transaction fees | Mining reward and transaction fees | Staking reward and transaction fees |
| Vulnerability of attack | Vulnerable if 1/3 nodes are compromised | Vulnerable to 51% attack | Vulnerable to majority stake control |
| Examples | Hyperledger, Fabric, Tendermint | Bitcoin, Ethereum | Cardano, Ethereum 2.0 |
PoW, PoS, and BFT will continue to influence the development of open source blockchain systems as the technology advances. PoS provides a viable substitute for PoW, which is still a cornerstone of security, while BFT excels in fault-tolerant settings. Every consensus algorithm has a role in the blockchain ecosystem, and it’s critical for both developers and users to comprehend how they differ from one another. Selecting the best consensus mechanism will be crucial as open source blockchain projects develop further, impacting sustainability, security, and performance.
