Blockchains rely on consensus algorithms to reach agreement among nodes. Blockchains can be thought of as decentralized databases that are managed by distributed computers on a peer-to-peer (P2P) network. A consensus mechanism is a fault-tolerant mechanism that is used in computer and blockchain systems to achieve the necessary agreement on a single data value or a single state of the network among distributed processes or multi-agent systems.

There are several kinds of consensus models which work on different principles and we will highlight two of them that Energi (NRG) is and will be using.

Proof of Work (POW)

The proof of work (POW) consensus model is commonly used by the most popular cryptocurrency networks like Bitcoin and Litecoin. POW is a requirement to define an expensive computer calculation, called mining. Those miners are then rewarded an incentive whenever they solve a problem within the blockchain network. In a way, miners are competing against each other to be the first to find a solution to the mathematical problem. NRG miners are a vital part of Energi’s consensus network. Miners are rewarded for employing their compute power to secure the Energi network.

To learn more about mining Energi, please visit the links below:

Proof of Stake (POS)

Proof of stake (POS) is another common consensus algorithm that evolved as a low-cost, low-energy consuming alternative compared to Proof of Work. Instead of rewarding miners who solve mathematical problems with the goal of validating transactions and creating new blocks, POS algorithms achieve consensus by requiring users to stake a number of their coins or tokens so as to have a chance of being selected to validate blocks of transactions and get rewarded for doing so.

Below are the benefits of using a POS consensus model:

Energy Efficient — POS avoids using tremendous amounts of energy. Cutting out the high energy demands from mining makes POS a much greener option. Reduction of Centralization Risks — Staking coins or tokens prevent bad actors from making fraudulent validations. Mining is currently dominated by industrial-sized operations that continually gain a larger influence over the hash rate compared to smaller operations. POS aims to reduce mining centralization. Flexible Design — POS opens incentivized opportunities to many users and not just for miner and masternode holders. No matter how small an NRG holder’s stake is, they will be able to receive rewards when staking their coins onto the network.

As stated in our Energi Roadmap, Energi plans to transition to a Proof of Stake consensus model. This consensus model will give users information about all previous transactions on the Energi network, become another decentralized database (node) and an opportunity to earn rewards by staking their coins onto the network.

With these added features, the POS protocol is attractive for users who do not want to solve complex problems and spend an outrageous amount on expensive equipment. This is why we’ve decided to transition Energi to a POS algorithm, in order to protect and further increase the contributions of our community. Anyone can participate in POS — whereas POW involves technical know-how to set up and manage, as well as local power & hardware cost considerations. Having some NRG is all that is required to participate in POS. We believe transitioning to Proof of Stake will build trust, bring awareness to the project, enhance its usability and availability, which will ultimately bring us one step closer to mass-adoption.