Consensus Mechanisms Part 2: Alternative Consensus Mechanisms

Consensus Mechanisms part 2: Alternative Consensus Mechanisms

Consensus mechanisms are crucial to cryptocurrency. Although there are a variety of consensus mechanisms used in different cryptocurrencies, they all have one thing in common: Cryptocurrency would not exist without them. In Consensus Mechanisms part 1 we discussed Proof of Work and Proof of Stake consensus mechanisms in great detail. In this article, we will be discussing alternative consensus mechanisms. If you would like to reference any of the previous material regarding Proof of Work or Proof of Stake, you can do so by clicking on the link above!

Delegated Proof of Stake

Delegated Proof of Stake is much like the traditional Proof of Stake model. The only difference between Delegated Proof of Stake and the traditional Proof of Stake Model is that the validators within this system do not actually have to stake coins on the network in order to validate transactions. A user in the Delegated Proof of Stake system has the option to elect another user to serve as a network validator node. The staked tokens of the individual who has elected a validator are still used as a network insurance policy, however they do not need to validate the transactions themselves. This system is essentially an improved version of the Proof of Stake Mechanism which offers stakers and validators more freedom, while still achieving the same goal. Stakers in this instance can still earn staking rewards, without setting up a validator node.

Some of the coins which use the proof of stake mechanism include TRON, EOS and XTZ.

Proof of Weight

Proof of Weight is an umbrella term used to describe consensus mechanisms which function similarly to Proof of Stake; however – unlike Proof of Stake – other measures can be “weighted” in lieu of a traditional “stake.” Proof of Weight can utilize measures such as reputation or space, which we will discuss next. Popular coins which utilize Proof of Weight consensus mechanisms include ALGO and FIO.

Proof of Authority

In the Proof of Authority mechanism, Validator nodes need to be publicly known and publicly verified. These validator nodes are known as authority nodes. The idea behind the Proof of Authority system is that those who operate authority nodes are unable to do so anonymously. If an authority node validates a fraudulent transaction, it will damage the reputation of whoever is operating the node. This incentivizes authority node operators to play by the rules. Proof of Authority is a more centralized consensus mechanism which functions similarly to a central database. In fact, the Proof of Authority system is criticized by some because having transactions verified through a small number of nodes causes the Proof of Authority consensus mechanism to behave somewhat like a central database with extra steps.

Some of the coins which utilize the Proof of Authority Mechanism include DOT and VET.

Proof of Capacity (AKA Proof of Space and Time)

Proof of Capacity is based off the Proof of Work Model; however, miners within the Proof of Capacity model – aka provers – allocate disk storage or memory, rather than processing power. This is a more economically friendly consensus mechanism than the Proof of Work model and is highly efficient when it comes to the prevention of spam attacks. A prover sends a verifier piece of data to the network, proving that they have allocated enough space, when they would like to verify the next block.

Some of the coins which use the Proof of Capacity model include XCH and BURST.

Federated Byzantine Agreement

In the Federated Byzantine Agreement system, transaction information is sent to validator nodes and each node compares the incoming transaction information with some of the information that the node already has, in order to verify the transaction’s legitimacy. The node then compares its results with the other nodes and the transaction either passes through the network or fails, depending on the how many of the nodes passed or failed the transaction. The nodes do not have to arrive at a unanimous consensus to make a decision; rather, the transaction is processed by a majority vote.

The individual nodes themselves are made up of sub-nodes which arrive at a conclusion in the same way as the nodes arrive at a conclusion for the network.

XRP is one of the most well-known cryptocurrencies to utilize a Federated Byzantine Agreement consensus mechanism.

Directed Acyclic Graph Technology

Directed Acyclic Graphing is a lightweight alternative to blockchain technology in which each wallet address stores its interactions with other wallets in its own mini-blockchain. Rather than keeping a single record of every transaction on the network, individual wallets only keep track of deposit and withdrawals between itself and other wallets. Since every wallet holds one small piece of the network in its own mini blockchain, all of the wallets form a grid pattern of direct transactions. Because almost zero information needs to be verified by an outside validator for Directed Acyclic Graph systems to operate, transaction speeds are only limited to network latency. Furthermore, Directed Acyclic Graph Technology is free of gas fees, as each wallet is contributing equally to the validation of the network. Directed Acyclic Graph Technology requires a negligible amount of electricity and processing power to operate efficiently, and – unlike blockchain technology – is infinitely scalable in size and transactions per second (TPS).

The most common cryptocurrency project to utilize Directed Acyclic Graph Technology is the NANO project.

In Conclusion

There are many more consensus mechanisms than those listed in this article; however, these are the most widely used consensus mechanisms outside of Proof of work and Proof of Stake. New consensus mechanisms appear every few months and will continue to change and evolve as time passes by.

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