Consensus Mechanisms

In a blockchain network, consensus is distributed across a network of nodes, which work together to validate transactions and maintain the integrity of the ledger

Consensus mechanisms are essential to blockchain technology, enabling participants in a decentralized network to agree on the current state of the blockchain. These mechanisms validate transactions and ensure that every participant in the network holds a synchronized copy of the distributed ledger. Both private and public blockchains rely on consensus algorithms, but they differ in how users interact with them.

In private blockchains, access is restricted, and participants need special permissions to engage with the network. In contrast, public blockchains allow anyone to freely join, participate, and interact without the need for prior authorization, earning them the name “permissionless” blockchains. Despite these differences, consensus mechanisms are crucial for maintaining trust, security, and integrity in both types of blockchain networks.

Abstract

Day-by-day, both data and network size are growing at a rapid rate. It is essential to keep private data secure and also prevent malicious activities. In a permissionless blockchain, nodes do not take permission for participation. One can directly mine a block by performing an open task. Security can be a significant issue here. Also, there is no third-party involvement in blockchain, so keeping trust among peers is an essential feature. The distributed public ledger stores history of old transactions to maintain trust between peers. To prevent malicious activities, consensus algorithms are used, which are defined as a complex task that a miner must perform to mine new blocks into the blockchain. In this chapter, various consensus mechanisms are mentioned with merits and demerits. With high computation power and digital currencies, nodes can quickly get into the blockchain and perform malicious activities. For that, various consensus algorithms are used like Proof of Work (PoW), Proof of Stake (PoS), Proof of Burn (PoB), Proof of Capacity (PoC), etc.

Every consensus is developed to solve issues of previously developed consensus and provide more efficiency concerning resource allocation, scalability, security against attacks, power consumption, etc. Bitcoin is one of the use cases of blockchain, which is developed upon the PoW consensus method. Various companies have developed cryptocurrencies that are based on consensus algorithms.

Consensus can be implemented on smart contracts to govern specific rules in the blockchain. While working with extensive transactions and a large chain of blocks, scalability, efficiency, and malicious attacks are significant issues. We have done a comparative analysis of all the consensus algorithms based on such issues.

Properties of Distributed Consensus

Distributed consensus protocols must adhere to specific properties to ensure a reliable and coordinated decision-making process across all participating nodes. These properties are essential to maintain consistency, trust, and accuracy in a decentralized network. The key properties are as follows:

1. Termination: This property ensures that every correct (non-faulty) node in the network will eventually make a decision and agree upon a value by the end of the consensus process. It guarantees that the consensus protocol will terminate successfully with all non-faulty nodes agreeing on a valid outcome.

2. Validity: If all participants propose the same value, then all correct nodes must decide on that same value. For instance, if every node proposes the value '10', the consensus process ensures that the result will be '10' without deviation. This property ensures that consensus reflects the true intentions of the network participants.

3. Integrity: Every correct node can decide on only one value, and the decided value must have been proposed by one or more nodes in the network. This property prevents the network from arriving at a consensus on a value that was never suggested by any participant. For example, if no node proposes the value '20', it should never appear in the final consensus decision.

4. Agreement: All correct nodes must agree on the same value once the consensus process completes. If one node reaches a decision, every other non-faulty node must reach the same conclusion. This ensures that the network reaches a unified agreement and maintains consistency across all participants.

Now that we’ve covered the essential properties of distributed consensus, let’s dive into some of the most prominent consensus mechanisms used across blockchain systems. These include various “proof” based models such as Proof of Work (PoW), Proof of Stake (PoS), and more. Each of these mechanisms serves a unique purpose in validating transactions, ensuring network security, and achieving consensus among nodes in a decentralized network. Below are links to explore these consensus mechanisms in detail.