Critical Analysis of Decision Making Algorithms of Blockchain
No one can deny the fact that the blockchain is the future of our society. One day the blockchain and its various subsets are going to be as ubiquitous as cars, the internet, ACs, and computers.
This present-day cutting-edge and mysterious technology is the future for tomorrow revolutionizing not only the technological world but also the captivating business, mathematics, economics, finance, philosophy, sociology, politics, and numerous other sectors.
With such tremendous power, potential, and interdisciplinary nature of the blockchain, it is important to bring this technology to mainstream society and educate people about its advantages and applications.
Today let us look at the ways of reaching a consensus over a blockchain network and its merits and demerits. Methods of reaching a consensus have undergone a roller-coaster ride since the inception of the blockchain by Satoshi Nakamoto.
What really is the consensus?
Since the blockchain is a subset of Distributed Ledger Technology, there is no supreme decision-making body. This makes it important to design a framework and apply an innovative mechanism to allow users on the platform to reach a consensus.
A consensus is a collective decision-making process between the members of the platform to make the general agreement or joint decision for all the beneficiaries of the platform or system. The decision-making process is termed a consistency algorithm.
Popular Consensus Algorithm
The distribution networks over the blockchain utilize different algorithmic models to allow network members to reach a consensus. The key aspects of framing these algorithms are consistency, equality to every vote, cooperation, and ensuring participation of each member.
Collection of my past articles and lecture about the #Nxt #Ardor #Ignis #blockchain proof of stake consensus algorithm and popular attacks against them https://t.co/is1gxDudop pic.twitter.com/dBXufzB5Ko
— Lior Yaffe (@lioryaffe) December 20, 2018
1. Proof of Work (PoW)
This is the most popular and commonly used algorithm as it is used in Bitcoin and Ethereum which are the most popular applications of the blockchain. PoW is used to confirm transactions by performing computationally intensive operations by nodes on the network and then adding them to the network. The output is then compared to other network calculations and the first node to perform the necessary calculations is rewarded with some incentives and a transaction fee.
Advantages of this method
- It promotes a fair reward distribution system and promotes healthy competition among participating nodes.
- The probability of error creation is zero as computational performance is the basis of PoW which is associated with the physical world i.e. the computation performed by nodes owned by the dishonest user.
The disadvantage of this method
- The requirement for electrical energy for computation is enormous as many nodes perform computation but only the first one to solve is rewarded, thus wasting the energy used by other nodes.
- The cost for consumption forces nodes to confine to certain geographical boundaries.
- The system is vulnerable to 51% attacks. Entities with access to more powerful computing systems can perform more computation and pose a centralized threat.
- The calculations take a long time thus hampering fast micro-transactions.
2. Proof of Stack (PoS)
PoS doesn’t use the mechanism of rewarding for computation. Here the validator locks in part of the funds by converting them to shares that may be added to the blocks of the network. Members compete for the right to confirm the transaction and the higher the account holdings of the members, the higher their chances of signing the block and receiving the transaction fee as a commission from the block.
Also, read – What makes these blockchain networks different?
Advantages of PoS
- Not susceptible to 51% attacks and the transaction process is faster.
- Consumes less energy than PoW as the verification process is completely virtualized and does not require heavy calculations.
Disadvantage of PoS
- The system is somewhat centralized as the more money you have more chances of verification you get.
- The pos mechanism has become more complex due to mandatory equity and other provisions to prevent unethical participants from compensating for the “gap” in cybersecurity by introducing economic factors.
3. Proof of Capacity (PoC)
This method basically uses hard disk space rather than computing performance. The idea is harder the disk space the miner has greater are his chances of finding the hash needed to construct a new block and getting rewarded (if they find the hash before the deadline).
Advantage of PoC
- No special equipment is required.
- Solves the problem of high energy consumption as in PoW and rewards members with the maximum account holding in the account as in PoS.
Disadvantage of PoC
- This algorithm is applicable to the small private network but is not popular.
- The user’s hard disk space can be used to mine malware without his assistance or knowledge.
These powerful methods of reaching a consensus over a blockchain platform will soon become revolutionary in nature.