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Proof of work and proof of the poleShutterstock
The main purpose of a consensus mechanism is always the same: it is there to provide proof of something, to ensure that all nodes in the network can agree on the true and valid status of the blockchain. Here's how malicious network attacks are avoided. Without it, there could be no value in the crypt.
In the blockchain, it is the public that, on the whole, verifies and records the time. Once the data is validated by the participating users or nodes, the transaction is added to a block that is permanently written to the blockchain.
The new block is connected to the previous block and transmitted to the entire network thus obtaining the consent: the copy of each node of the blockchain will be identical.
However, different consensus algorithms tend to address a similar problem; they struggle to guarantee both liveliness and security. There is not yet a solution that conclusively ensures that "something good happens" at the same time ensures that "nothing bad happens".
Bitcoin uses a Proof of Work algorithm that presents well-documented challenges that threaten to be fatal. Proof-of-Stake has gained popularity later and implies that users demonstrate that they have focused on cryptography to validate transactions, but favors the already wealthy and runs the risk of creating a 51% shareholder.
The deep and structural problems with these methods are part of the reason why many startups have started looking for other ways to reach consensus.
The alternatives are being processed
While the development communities for Bitcoin and Ethereum are constantly working to improve their systems, there are less known consensus mechanisms that seek to be the focus of attention.
1. Proof of authority
PoA is a type of game test in which the identity of the user constitutes the stake. A validator must be personally identified and verified on the platform, making them a reliable node.
Users who confirm their identity earn the right to validate blocks on the chain. The cryptographic awards they receive are public, as well as the malicious actions taken; this means that individuals have their personal reputation at stake when they act to protect the network.
The Fairlayer by Egor Homakov is very recent, so they are far from being interested in the project, not to mention the launch of the coin on the market. But Homakov has a strong credibility and some in the technology community are inclined to believe he is doing exactly what he says: building an infinitely scalable blockchain that does not compromise security.
To begin with, Fairlayer will be awarded 100 stake tokens and will gradually distribute them to 99 other entities – "the most famous is the best" – with at least two thirds of the total number of stake participation entities required to validate each block.
The idea follows that the first 100 validators will be on board three validators at a time until reaching a critical mass of 10,000. In theory, this provides an almost impassable attack surface. It makes incredibly bold statements in the abstract design so it's worth reading.
Another prominent player who uses PoA is Vivacoin. They propose a different methodology with few other levels, but the concept remains focused on the identity stakeout. Meanwhile, VeChain has an extremely sustainable business solution based on a PoA consensus mechanism.
It would not be a surprise to see Proof of Authority become more common in the blockchain space.
2. Markov Chain Monte Carlo (MCMC)
It was probably the biggest success of IOTA to communicate what is a complicated and non-standard technology between the blockchain's umbrella.
They run on a Directed Acyclic Graph (DAG) architecture – dubbed "Tangle" – and use MCMC to reach consensus. This is a complex algorithm that is best understood by statisticians, but the concept is simple when applied.
After a user has transmitted their transaction, the algorithm randomly selects two unconfirmed transactions to be verified. With IOTA, a small amount of Proof of Work is required to confirm these transactions and the transmission of the user can be verified by someone else.
Initially, IOTA will use the "coordinators", or main nodes, that act as network security ensuring fraudulent transactions and attacks that can be rejected. Furthermore, no mining means a huge increase in energy efficiency.
Matrix also proposes to use MCMC, as well as BigTangle whose construct looks similar in design to IOTA although perhaps slightly less detailed.
Built on the blockchainShutterstock
3. Proof of the contribution
POC is another consensus mechanism that does not use mining. Basically, it is an algorithm that reaches consensus by measuring the useful contributions of users who support the functions of the network.
An attack on the network is theoretically impeded by the high cost required to overload the system. It is the system chosen by CyberVein: they propose a network of decentralized databases that come from the disk space donated by the user.
The POC is based on storage space and allows users to provide consent by giving useful work to the network. This is converted into a secure and collective home for datasets and users are rewarded with cryptographic tokens.
Because storage capacity is a scarce resource, it is believed that an attack becomes impossible due to the high cost required. This is not alone a failsafe, however; they run away from a similar DAG architecture in the IOTA design and, like them, will initially use centralized nodes to safeguard the main chain.
A separate blockchain that uses Proof of Work is another solution that they propose to protect the main DAG, ensuring that fraudulent transactions are eliminated and that the entire network can be verified as true.
In addition, users are encouraged to become trusted full nodes, obtained by donating sufficient disk space to store the entire network and all its transactions, offering a higher payment of CyberVein token (CVT) based on amount of storage that contribute.
Providing disk space to store value and intelligent contractual transactions directly benefits the purpose of the system: to distribute data stored on users' devices.
4. Byzantine Agreement
The two most important BA systems are in Ripple and Stellar, and it's an attractive mechanism. Consent can be reached quickly and economically and does not restrict ownership of the assets.
However, this method requires some degree of centralization as otherwise it would require an unrealistic level of coordination and equality of resources.
Both Ripple and Stellar use a voting method – Ripple uses probabilistic voting, Stellar uses federated – which favors vividness and security, respectively.
So with Ripple: the validation nodes collect the transactions, turn them into proposals and send them to other validators. When proposals are received, they take a series of votes to eliminate fraudulent transactions.
For practical purposes, this works, but the probability that the validated transactions are actually valid is slightly less than 99%. This is where the security compromise exists and that is why Ripple will probably have to work on a centralized basis or develop an alternative solution.
A traditional Byzantine Agreement system has a closed membership in which the number of participating nodes is fixed. Stellar instead allows open membership, in which the nodes can join and leave at will.
Their federated model means that a node can reach consensus with a "consortium" of nodes that it finds reliable, without involving all the nodes in the network. While Ripple requires that all nodes accept the same transactions through a series of votes, the federated vote means that a node must rely only on a single group to verify its transactions.
A Byzantine Agreement system is essentially costless and scalable: throughput is 4,500 transactions per second with 64 nodes. More nodes than this reduces network performance, but this is still far from the estimated maximum Bitcoin of seven transactions per second.
Blockchain is nascent
Blockchain as we know it is still being defined; that is to say, it may still take some time before the technology becomes fully operational. A key challenge exists in the development of an effective consensus mechanism that does not compromise the notion of decentralization.
Compromises could be needed here, but maybe not. While Ripple is centralized – although it has suggested a "decentralized strategy" – IOTA and CyberVein are examples of networks that will start with centralized controls, but only until they reach a critical mass of users.
This will depend on what is possible and what works. Just start the startups to design alternative methods of consent so that a winner can come from anywhere. Some show great promise: it could be that a future solution that marries security with scalability is already on hold.
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Proof of work and proof of the poleShutterstock
The main purpose of a consensus mechanism is always the same: it is there to provide proof of something, to ensure that all nodes in the network can agree on the true and valid status of the blockchain. Here's how malicious network attacks are avoided. Without it, there could be no value in the crypt.
In the blockchain, it is the public that, on the whole, verifies and records the time. Once the data is validated by the participating users or nodes, the transaction is added to a block that is permanently written to the blockchain.
The new block is connected to the previous block and transmitted to the entire network thus obtaining the consent: the copy of each node of the blockchain will be identical.
However, different consensus algorithms tend to address a similar problem; they struggle to guarantee both liveliness and security. There is not yet a solution that conclusively ensures that "something good happens" at the same time ensures that "nothing bad happens".
Bitcoin uses a Proof of Work algorithm that presents well-documented challenges that threaten to be fatal. Proof-of-Stake has gained popularity later and implies that users demonstrate that they have focused on cryptography to validate transactions, but favors the already wealthy and runs the risk of creating a 51% shareholder.
The deep and structural problems with these methods are part of the reason why many startups have started looking for other ways to reach consensus.
The alternatives are being processed
While the development communities for Bitcoin and Ethereum are constantly working to improve their systems, there are less known consensus mechanisms that seek to be the focus of attention.
1. Proof of authority
PoA is a type of game test in which the identity of the user constitutes the stake. A validator must be personally identified and verified on the platform, making them a reliable node.
Users who confirm their identity earn the right to validate blocks on the chain. The cryptographic awards they receive are public, as well as the malicious actions taken; this means that individuals have their personal reputation at stake when they act to protect the network.
The Fairlayer by Egor Homakov is very recent, so they are far from being interested in the project, not to mention the launch of the coin on the market. But Homakov has a strong credibility and some in the technology community are inclined to believe he is doing exactly what he says: building an infinitely scalable blockchain that does not compromise security.
To begin with, Fairlayer will be awarded 100 stake tokens and will gradually distribute them to 99 other entities – "the most famous is the best" – with at least two thirds of the total number of stake participation entities required to validate each block.
The idea follows that the first 100 validators will be on board three validators at a time until reaching a critical mass of 10,000. In theory, this provides an almost impassable attack surface. It makes incredibly bold statements in the abstract design so it's worth reading.
Another prominent player who uses PoA is Vivacoin. They propose a different methodology with few other levels, but the concept remains focused on the identity stakeout. Meanwhile, VeChain has an extremely sustainable business solution based on a PoA consensus mechanism.
It would not be a surprise to see Proof of Authority become more common in the blockchain space.
2. Markov Chain Monte Carlo (MCMC)
It was probably the biggest success of IOTA to communicate what is a complicated and non-standard technology between the blockchain's umbrella.
They run on a Directed Acyclic Graph (DAG) architecture – dubbed "Tangle" – and use MCMC to reach consensus. This is a complex algorithm that is best understood by statisticians, but the concept is simple when applied.
After a user has transmitted their transaction, the algorithm randomly selects two unconfirmed transactions to be verified. With IOTA, a small amount of Proof of Work is required to confirm these transactions and the transmission of the user can be verified by someone else.
Initially, IOTA will use the "coordinators", or main nodes, that act as network security ensuring fraudulent transactions and attacks that can be rejected. Furthermore, no mining means a huge increase in energy efficiency.
Matrix also proposes to use MCMC, as well as BigTangle whose construct looks similar in design to IOTA although perhaps slightly less detailed.
Built on the blockchainShutterstock
3. Proof of the contribution
POC is another consensus mechanism that does not use mining. Basically, it is an algorithm that reaches consensus by measuring the useful contributions of users who support the functions of the network.
An attack on the network is theoretically impeded by the high cost required to overload the system. It is the system chosen by CyberVein: they propose a network of decentralized databases that come from the disk space donated by the user.
The POC is based on storage space and allows users to provide consent by giving useful work to the network. This is converted into a secure and collective home for datasets and users are rewarded with cryptographic tokens.
Because storage capacity is a scarce resource, it is believed that an attack becomes impossible due to the high cost required. This is not alone a failsafe, however; they run away from a similar DAG architecture in the IOTA design and, like them, will initially use centralized nodes to safeguard the main chain.
A separate blockchain that uses Proof of Work is another solution that they propose to protect the main DAG, ensuring that fraudulent transactions are eliminated and that the entire network can be verified as true.
In addition, users are encouraged to become trusted full nodes, obtained by donating sufficient disk space to store the entire network and all its transactions, offering a higher payment of CyberVein token (CVT) based on amount of storage that contribute.
Providing disk space to store value and intelligent contractual transactions directly benefits the purpose of the system: to distribute data stored on users' devices.
4. Byzantine Agreement
The two most important BA systems are in Ripple and Stellar, and it's an attractive mechanism. Consent can be reached quickly and economically and does not restrict ownership of the assets.
However, this method requires some degree of centralization as otherwise it would require an unrealistic level of coordination and equality of resources.
Both Ripple and Stellar use a voting method – Ripple uses probabilistic voting, Stellar uses federated – which favors vividness and security, respectively.
So with Ripple: the validation nodes collect the transactions, turn them into proposals and send them to other validators. When proposals are received, they take a series of votes to eliminate fraudulent transactions.
For practical purposes, this works, but the probability that the validated transactions are actually valid is slightly less than 99%. This is where the security compromise exists and that is why Ripple will probably have to work on a centralized basis or develop an alternative solution.
A traditional Byzantine Agreement system has a closed membership in which the number of participating nodes is fixed. Stellar instead allows open membership, in which the nodes can join and leave at will.
Their federated model means that a node can reach consensus with a "consortium" of nodes that it finds reliable, without involving all the nodes in the network. While Ripple requires that all nodes accept the same transactions through a series of votes, the federated vote means that a node must rely only on a single group to verify its transactions.
A Byzantine Agreement system is essentially costless and scalable: throughput is 4,500 transactions per second with 64 nodes. More nodes than this reduces network performance, but this is still far from the estimated maximum Bitcoin of seven transactions per second.
Blockchain is nascent
Blockchain as we know it is still being defined; that is to say, it may still take some time before the technology becomes fully operational. A key challenge exists in the development of an effective consensus mechanism that does not compromise the notion of decentralization.
Compromises could be needed here, but maybe not. While Ripple is centralized – although it has suggested a "decentralized strategy" – IOTA and CyberVein are examples of networks that will start with centralized controls, but only until they reach a critical mass of users.
This will depend on what is possible and what works. Just start the startups to design alternative methods of consent so that a winner can come from anywhere. Some show great promise: it could be that a future solution that marries security with scalability is already on hold.
