By: Sameer Zubairi | 4 min read | 25/01/2019

Consensus Algorithms Securing Blockchain Transactions

Consensus algorithms are often hailed as the most important characteristic when comparing coins. Understandably, an algorithm used to determine the network consensus is one of the key differentiators between coins. Many altcoins were created on the basis of trying to improve the Bitcoin consensus algorithm, which many believe to be slow and too resource exhaustive for scalability. Coins like Bitcoin Cash and Litecoin emerged as attempts to adjust the original protocol for the sake of faster transaction speeds and scalability.

THE BYZANTINE GENERALS’ PROBLEM

Consensus algorithms are trying to achieve one important goal, to prevent malicious nodes in the network from propagating incorrect information. A good analogy is the Byzantine Generals’ Problem. This starts off with the ancient Byzantine army surrounding a city, waiting to attack. If the generals choose to attack, they must all go at the same time, and if they choose to retreat, they must all do it at the same time. If anyone fails to follow through, the entire mission is compromised.

If all the generals and lieutenants involved are onboard with the conquest, then trust is very easy to establish, and the orders are likely to be carried out by everyone. The only issue is, there are traitors in the ranks who are likely to propagate the wrong orders to their peers. Therefore, the problem is, how do you get everyone, including the traitors, to follow through with the orders being carried out? Similarly, how do you get everyone on a blockchain network, including malicious nodes, to validate transactions truthfully?

PROOF OF WORK VS. PROOF OF STAKE

Two commonly implemented consensus protocols are Proof of Work and Proof of Stake. There has been a lot of debate in recent months about which is better, with supporters on both sides. It is clear that with any consensus algorithm, there are payoffs. Thus, the “correct” algorithm depends on the needs of the overlying blockchain project.

Here is a comparison of the two most common consensus protocols:

PROOF  OF BURN

A Proof of Burn algorithm uses a very interesting criterion for selecting its miners. Basically, to become a miner on a Proof of Burn network, a user must send some of their coins to an Eater Address. Eater Addresses are unspendable wallets, where the coins held have basically been removed from circulation. This may seem counterintuitive to a miner seeking a reward for their work and how this helps to ensure that a trustworthy miner is selected, so let’s dig a little deeper.

By burning their short term profits, miners display their commitment to the blockchain network for the sake of long term gains. The more coins that a user burns, the higher their likelihood is of being selected as the miner for a new block.

This concept makes the assumption that the more willing a miner is to forego their short term losses, the more likely they are to protect the integrity of the network by behaving honestly. Over time, more coins must be sacrificed by miners to maintain a similar likelihood of being chosen to generate new blocks.

CONCLUSION

Regardless of the type of consensus algorithm a network uses, they are basically trying to solve the Byzantine Generals’ Problem. Which is why the basis of judging their functionality is known as Byzantine Fault Tolerance.

This represents the ability of a distributed computer network to function properly despite likely having malicious nodes as part of the network. The ability for a consensus algorithm to mitigate the influence of these malicious nodes without using too much processing power is a good criteria for judging them and, ultimately, the overlying cryptocurrency they are backing.

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