Consensus mechanisms (also known as consensus protocols or consensus algorithms) allow distributed systems to work together and stay secure. These mechanisms, essential to a blockchain network, e.g. bitcoin blockchain, approve the addition of transactions or records to the decentralized distributed ledger and makes sure that all nodes are connected to the same network. They also regularly confirm and validate all transactions to help ensure that all nodes within the network are synchronized and that the transactions are legitimate. As far as a transaction is concerned, if several nodes with no conflicting interests reach a consensus on it, then the whole network can be deemed to have reached the same consensus, which rejects any fake or fraudulent record. Today, we will introduce three common consensus mechanisms adopted by blockchain projects, including Proof of Work(PoW), Proof of Stake(PoS), and Proof of Capacity(PoC).
What isProof of Work (PoW)?
Proof of Work(PoW) is the oldest consensus mechanism. It accounts for more than 75% of the market cap of blockchain protocols. It is extensively used by Bitcoin, Ethereum, Litecoin, etc.
How does PoW work?
In PoW, miners add new blocks with transaction information to existing blocks by finding a random number that can be run through a universal encrypting function to the network and can satisfy a difficulty requirement. To this end, miners have adopted many mining methods, including CPU mining, GPU mining, etc.
The primary advantage of PoW is the provision of a reliable mechanism to achieve consensus and prevent the misuse of blockchain. Moreover, PoW also boasts a specific advantage: It relies on hashing power. On the other hand, the biggest disadvantage of PoW is also the hashing power required to solve the mathematical problems involved in the validation of transactions on a blockchain.
What isProof of Stake (PoS)?
Proof of Stake(PoS) doesn’t require participants to use computational power to hash blocks and solve a mathematical requirement but to stake tokens. Participants are randomly selected to become block validators based on their wealth, and validators need to stake an amount of cryptocurrency that covers the transaction fee and their potential reward until the block is successfully appended. The idea of PoS is to divide the voting power of miners by their hashing power. In other words, PoS gives mining power based on the percentage of tokens held by a miner. A miner who holds a greater share of the total token supply will be more likely to be elected for mining the next block. Additionally, if inconsistent, absent, and abnormal behaviors are detected, dishonest participants could lose their stakes and be banned from the network.
How does PoS work?
Compared to PoW, PoS is more efficient. Plus, it does not require the use of powerful computers and huge energy consumption. With PoS, individuals can participate in the relevant peer-to-peer network without the need to buy and set up expensive, powerful computers and cooling systems. Another advantage of PoS lies in that it keeps the blockchain network secure by motivating correct validation and punishing incorrect validation. The disadvantage of PoS is its limited accessibility. Also, it is vulnerable to a 51% attack.
What is Proof of Capacity (PoC)?
Proof of Capacity (PoC) is one of the many alternative solutions to the problem of high energy consumption in proof-of-work (PoW) systems and crypto hoarding in proof-of-stake (PoS) systems. Proof of Capacity allows the mining devices on the blockchain network to use vacant space on their hard drive to mine the available cryptocurrencies.
How does PoC work?
PoC works by storing a list of possible solutions on the mining device’s hard drive before the mining activity begins. Once the storage device is filled with mathematical solutions, users can generate blocks. The first user who finds the solution has the opportunity to create a new block. The merits of PoC include its supports for any regular hard drives. Additionally, when using PoC, there is no need for dedicated hardware or constant upgrading of hard drives. Moreover, mining data can be easily wiped off and the drive can be reused for any other data storage purpose. PoC also comes with a drawback: it is adopted by only a few developers and malware could affect its mining activities.