Achieving Consensus

The concept of consensus is straightforward: consensus is when the network agrees on what information stored in the network is true and should be kept, and what is not true and should not be kept. For Bitcoin, achieving consensus is a simple matter of coming to agreement on the set to send and receive of Bitcoin across the network. For other networks, achieving consensus would also involve coming to an agreement on the final state of smart contracts, medical records, or any other network information stored on the blockchain.

Consensus algorithms have been the subject of research for decades. The consensus algorithms for distributed systems have to be resilient to multiple types of failures and issues, such as corrupt messages, parts of a network connecting and disconnecting, delays, and so on. In financial systems, and especially in blockchains, there is a...

Practical Byzantine fault tolerance algorithm

Practical Byzantine fault tolerance (PBFT) algorithm. Many algorithms are called Byzantine fault tolerant. The name comes from the allegory that presented the original problem.

Imagine an ancient Byzantine army moving to capture a city. The idea is to attack from all sides. Once the generals of the army reach the city, they must agree on when and how to attack. The difficulty is in how to agree. The generals can communicate only by messenger, but the messengers could be captured by the enemy, and there is the additional fear that one or more of the generals or their commanders are traitors.

The generals need a method to ensure that all the loyal generals agree on the same plan, and that a small number of possible traitors cannot cause the mission to fail.

The loyal generals will all do what the method says they will do, but the traitors...

Proof of Work

The first consensus algorithm used in blockchains was Bitcoin's proof-of-work (PoW). Proof-of-work fundamentally functions by exploiting a feature of certain cryptographic functions: there are mathematical problems that are very hard to solve, but once they are solved, they are very easy to check. As discussed before, one of these problems is hashing: it's very easy to take data and compute a hash from it, but extremely difficult to take a hash and discover the input data. PoW is most notably used by Bitcoin, Litecoin, and Ethereum.

PoW has the following characteristics:

• Relatively predictable time to solution: Bitcoin's network protocol expects each block to take about ten minutes to solve. If the network starts to solve the proof-of-work problem too quickly, the network will automatically increase the difficulty.
• Resistant to large increases or...

Proof of Stake

PoS has the same objectives as PoW to secure the network against attack and to allow consensus to occur in an open network. The first digital currency to use this method was Peercoin, and was followed by many others, such as NXT, Dash, PIVX, and so on. In PoW networks, solving the puzzle is what determines which node gets to create the next block in the chain. In PoS networks, blocks are said to be forged instead of mined, as they are in proof-of-work blockchains. In PoS chains, the validators get rewarded by getting paid the transaction fees for each block, and sometimes in additional coins created automatically each time a block is created. In PoS chains, the chance to be the creator of the next block is determined by the amount of investment a node has in the network.

Have a look at the following example:

There are five nodes in a PoS network. They have the following...

Proof of Authority

Proof-of-authority (PoA) networks are used only when all blockchain participants are known. In proof-of-authority, each participant is known and registered with the blockchain. Such a blockchain is called a permissioned chain, as only computers that are part of this approved list of authorities are able to forge blocks. It is critical, therefore, that none of the authority computers is compromised, and each operator must take pains to ensure the integrity of their validator. This approach was originally shared by Gavin Wood of Parity Technologies as a different way of running an Ethereum-based blockchain.

Establishing authority

The three main conditions that must be fulfilled for a validator to be established...

Proof of Elapsed time

The Hyperledger Sawtooth project introduced a new consensus mechanism called proof-of-elapsed-time or PoET. Hyperledger deals mostly with permissioned blockchains, chains in which only a specified number of participants are allowed on the network, similar to PoA chains.

The basic approach is simple:

• Each node must wait a random amount of time
• The first node to stop waiting gets to create a block

There are two things that we must be able to do for this to work. First, we must be able to verify that the waiting time for all participants was actually random, or else a simple attack would be to pretend to wait a random time and then just immediately create a new block. Second, it must be verifiable that not only was the length of time chosen random, but that the node actually waited the full period of time before acting.

The solution to these issues comes from...

Summary

At this point, you should have a solid foundation in the different mechanisms that blockchains use to reach consensus. Each consensus algorithm makes certain trade-offs between speed, availability, consistency, and fault tolerance. The most common consensus mechanisms are still PoW and PoS, but blockchain development continues at a very rapid pace, and new and improved approaches are likely to be developed. Improvements to consensus algorithms will improve blockchain scalability and reliability, and the scope of the potential applications for the technology.

References

1. https://groups.csail.mit.edu/tds/papers/Lynch/jacm85.pdf
2. https://www.microsoft.com/en-us/research/publication/byzantine-generals-problem/?from=http%3A%2F%2Fresearch.microsoft.com%2Fen-us%2Fum%2Fpeople%2Flamport%2Fpubs%2Fbyz.pdf
3. https://github.com/tendermint/tendermint.com/blob/5c111743a03d2c6ed2e0b14bd3091cac8974c8da/docs/tendermint_v02.pdf
4. https://peercoin.net/assets/paper/peercoin-paper.pdf
5. https://github.com/ethereum/guide/blob/master/poa.md
6. https://medium.com/poa-network/proof-of-authority-consensus-model-with-identity-at-stake-d5bd15463256