Cryptocurrencies have been the talk of the town since their
evolution. People have started to show greater interest in it for various
purposes, such as investment. The cryptocurrencies work on their specific rules
and regulations, which go hand in hand and validate the transactions that take
place in the network of computers. The article aims to throw light on the
consensus mechanisms and their pros and cons. If you want to start bitcoin
trading, check how you can make profits from bitcoin.
What is a
The working functionalities of digital currencies are based on a
bunch of complex systems. The consensus mechanism is one of those intricate
working structures. It is associated with the consent of participants of a
particular network regarding any change in the entire linkage. After the
validation from all the node operators, a piece of data is added in the form of
a block in the distributed ledger system. These blocks constitute a blockchain
A consensus mechanism involves four significant steps:
- Agreement of the participants on
the same point.
- The tolerance to faulty nodes, if
there are any.
- The proposed value should be the
same for all node operators.
- The closure of entry after
Various currencies have adopted their consensus mechanisms, some of
which are explained below.
Proof of Work (PoW)
Proof of work refers to showing the mining procedure
carried out by solving complex mathematical equations and getting it confirmed
by other operators. It includes the agreement of at last 51 percent of the
entire network. Since it is used for major platforms whose
percentage is equal to trillions of dollars, it is
nearly impossible to commit any fraudulent activity.
It is helpful as it saves from
illegal events but uses so much time and energy and leads to high scalability.
Proof of Stake
Unlike proof of work mechanism, this system uses a single
person who verifies the transactions. The single validator is selected based on
the number of coins he has locked up in his digital wallet. The greater the
number of stacked coins, the
greater will be the chance of becoming the next validator.
Since it does not involve many people
for verification, a considerable amount of time and energy is saved.
Proof of Stake (DPoS)
This mechanism is much similar to PoS with a slight
difference. The difference lies in being a validator yourself or voting for
someone to be a validator. If you have not staked enough coins to verify the
transactions, you can vote for someone. In this way, you can earn a few rewards
for choosing a good validator. It is being operated at famous sources, such as
Because of similarity with proof of
stake consensus methods, it provides identical benefits. It saves energy and
reduces scalability to a great extent.
Proof of Space
As the name depicts, it uses the capacity of storage with
time as its consensus mechanism. For instance, it checks the data that has been
stored on a drive after long intervals. The random check enables the users to
have proof of their data that helps to choose the validator. Certain platforms
provide storage capacity for data and get paid with the native coin of
consumers. One such platform is Filecoin. It is also known as proof of
It just needs space, not high
electricity supplies or a lot of time, so that it can benefit the user.
Proof of weight includes various
things other than a mere number of coins. It also includes factors such as the
length of time for which the coins have been staked, the amount of data stored
and for how long, and other things that determine the reputation of a
stakeholder. It is widely used in Algorand.
ways mentioned above are a few generally used consensus mechanisms. Apart from
these, many other mechanisms are used to validate a new entry in the blockchain
network. Proof of work and proof of stake are the two most reliable and
commonly used mechanisms.