Consensus Algorithms

A consensus algorithm is a procedure through which all the peers of the Blockchain network reach a common agreement about the present state of the distributed ledger. In this way, consensus algorithms achieve reliability in the Blockchain network and establish trust between unknown peers in a distributed computing environment. The Blockchain consensus protocol consists of specific objectives such as coming to an agreement, collaboration, cooperation, equal rights to every node, and mandatory participation of each node in the consensus process.

Proof of Work (PoW):

In PoW, participants, known as miners, compete to solve complex mathematical puzzles. The first one to solve the puzzle gets the right to create the next block and add it to the blockchain. This process is energy-intensive and requires significant computational power.

Proof of Stake (PoS):

In PoS, validators (instead of miners) are chosen to create new blocks and validate transactions. Validators are selected based on the amount of cryptocurrency they "stake" or lock up as collateral. Validators are chosen randomly or pseudorandomly. The more cryptocurrency staked, the higher the chance of being chosen. PoS is considered more energy-efficient than PoW.

Delegated Proof Of Stake (DPoS):

This is another type of Proof of Stake consensus algorithm. This type of consensus mechanism works on the basis of the delegation of votes. Users delegate their votes to other users. Whichever user then mines the block will distribute the rewards to the users who delegated to that particular vote.

Proof of Capacity:

In the Proof of Capacity consensus, validators are supposed to invest their hard drive space instead of investing in expensive hardware or burning coins. The more hard drive space validators have, the better their chances of getting selected for mining the next block and earning the block reward.

Proof of Elapsed Time (PoET):

PoET is one of the fairest consensus algorithms which chooses the next block using fair means only. It is widely used in permissioned Blockchain networks. In this algorithm, every validator on the network gets a fair chance to create their own block.

Proof of Authority (PoA):

In PoA, consensus is reached through a set of known validators who are authorized to create blocks. Validators are typically well-known entities or organizations. It is often used in private or consortium blockchains.