Did you ever wonder what is the root of all the blockchain technology? You might know that every transaction that you make on a blockchain network is completely verified and secured. But have you ever wondered why, or more importantly, how? Well, Consensus algorithms in the blockchain technology are the primary roots of the network and are responsible for the nature of the network. Blockchain is completely secure because of the presence of the consensus protocol. Let us see what exactly is the consensus algorithms in the blockchain technology.

What is Consensus Algorithm?

A Consensus algorithm is a process in computer science in which distributed systems reach an agreement on a single data value. Thus, Consensus algorithms ensure reliability in a network that involves multiple nodes.

The Blockchain consensus protocol encompasses some specific objectives. That includes coming to an agreement, co-operation, collaboration, equal rights to every node, and mandatory participation of each node in the process. Thus, a consensus algorithm aims at finding a common agreement for the entire network.

Let us make it easy for you. In simple terms, it’s just a process to decide something within your group, say a group of ten people. These people want to make a decision about a concept that benefits them all. Each one of the groups will suggest an idea, but the majority will be in favor of the one that helps them the most. Others have to deal with this decision whether they liked it or not.

Now think the same thing with thousands of people. Consensus algorithms do not merely agree with the maximum votes, but it also agrees to one that will be beneficial for all of them. So, it’s always a win for the network.

Now, that we know what consensus algorithm is, let us discuss its types and how they work.

Types of Consensus Algorithms in Blockchain and How they Work?

The consensus algorithm is an absolute requirement for blockchain technology so that it can fully execute its capabilities. Be that as it may, you should know that there are different kinds of consensus algorithms. so let’s go over them and discuss how they are related to each other.

Proof of Work (PoW)

In this consensus algorithm, a miner is selected for the next block generation. Then, the miner solves the complex cryptographic puzzle before adding the block to the network. The miner solves the puzzle in exchange for Bitcoin. there are certain rules for adding a block to the network. The miner has to compete with other miners so as to find a correct hash for each hash function. This mathematical puzzle requires a lot of computational power and thus, the node who solves the puzzle as soon as possible gets to mine the next block. Bitcoin and other PoW cryptocurrencies use this algorithm.

Proof of Stake (PoS)

In PoS, validators invest in the coins of the system by locking up some of their coins at a stake. After that, all the validators will start validating the blocks by placing a bet on it if they discover a block that they think can be added to the chain. Based on the actual blocks added in the Blockchain, all the validators get a reward proportionate to their bets and their stake increase accordingly.

Proof of Burn(PoB)

With PoB, validators ‘burn’ coins by sending them to an address from where they are irretrievable. By doing this, they get to mine on the system based on a random selection process. Thus, burning coins here means that validators have a long-term commitment in exchange for their short-term loss. Depending on how the PoB is implemented, miners may burn the native currency of the Blockchain application or the currency of an alternative chain, such as bitcoin. The more coins they burn, the better are their chances of being selected to mine the next block.

Proof of Capacity(PoC)

In the Proof of Capacity consensus, validators invest their hard drive space. If a validator has more hard drive space he has a better chance to mine the next block and earning the block reward.

Proof of Elapsed Time(PoET)

PoET chooses the next miner using fair means only. Permission Blockchain uses this kind of algorithm for accessing the network. In this, each miner on the network waits for a random amount of time. The participant who has finished waiting will get a chance to be on the ledger for creating a new block.

There are other consensus algorithms in blockchain as well such as Proof of Activity, Proof of Weight, Proof of Importance, Leased Proof of Stake, etc.

Conclusion

You saw the various kinds of consensus algorithms that exist, so, it is important to wisely choose one as per your business network requirement. Without a consensus algorithm, in blockchain, the network won’t function properly in spite of being decentralized. It is the consensus algorithms that make blockchain versatile. There is not a single consensus algorithm that can claim it to be perfect but that is the beauty of the technology – the constant change for betterment.