When it comes to blockchain consensus you might have stumbled across “Proof of Work” or “Proof of Stake” but have you ever heard about “Proof of Burn”?<\/p>\n\n\n\n\n\n\n\n
Blockchain technology is widely known for its integrity and consistency of shared data. In order to be safe from corruption, it needs a mechanism to ensure a consensus throughout the whole network.<\/p>\n\n\n\n
The purpose of such a consensus protocol is to make the process of adding a new block to the chain so difficult, that it is not economical to create more than one block at a time. Users should be able to participate actively in establishing a consensus and get a reasonable reward for supporting the integrity and consistency of the network.<\/a><\/p>\n\n\n\n To ensure this approach is working, there are several different methods that can be applied. A very well-known method is the Proof of Work, which is used by Bitcoin. In the following article, you will find out how networks are protected from forks and manipulation.<\/p>\n\n\n\n Bitcoin, the first implementation of blockchain technology, was a paradise for tech-enthusiasts when it first started. The consensus-driven algorithm Proof of Work (POW) made it possible to earn money, only using the CPU of a private computer.<\/p>\n\n\n\n How POW works is pretty simple. To add a list of transactions in the form of a block there has to be proof that the miner fulfilled a complicated task. This means the miner has to solve a cryptographic puzzle. The task is to compute a SHA256-hash using the data of the block. At the same time the hash has to be in a specific format, for example it has to start with \u201c0000\u201d.<\/p>\n\n\n\n Every 10 minutes on average, a miner can form a block that fits these requirements. Since the number of miners and their computing power has grown quite drastically in the last few years, the difficulty of the task had to be increased as well.<\/p>\n\n\n\n Some examples of where POW is\/was used:<\/p>\n\n\n\n While Ethereum used POW at the beginning it later changed to Proof of Stake (POS). The basic idea of this blockchain consensus is that it is not a miner who did the computing that gets the rewards, but a miner who has invested more money. A dictatorship of the rich? Not completely.<\/p>\n\n\n\n In contrast to the Bitcoin network, mining Ether does not produce any coins. It is the so-called validator who earns Ether for a mining process that is quite different. Validators have to make a security deposit to start their work. The chance to complete a block rises according to the amount of the deposit.<\/p>\n\n\n\n Nevertheless, the winner is picked by default, so it is not clear from the beginning, who will be able to generate the block. Once the winner is picked, the whole network decides, whether the block is added or not.<\/p>\n\n\n\n To prevent validators from creating more than one block and collecting the transaction fees for all of them, they only get paid when the block has been added to the chain. As a result the manipulation of blocks should lose its charm.<\/p>\n\n\n\n Some examples of where POS is used:<\/p>\n\n\n\n Delegated Proof Of Stake (DPOS) is a very fast blockchain consensus-driven mechanism. It is renowned for its implementation in EOS. It is often referred to as digital democracy, thanks to its stake-weighted voting system.<\/p>\n\n\n\n In a DPOS system, users can stake their coins to vote for a delegate. The weight of their vote depends on their stake. For example, if stakeholder A stakes 10 coins for a delegate and stakeholder B only uses 1 coin, the vote of A is 10 times more powerful than B\u2019s.<\/p>\n\n\n\n Anyone, who wants to create a block is called a delegate. The delegate who receives the highest amount of votes will produce the next block and get the reward for creating it. Just like with POS, they are either paid from the transaction fees or they are paid a fixed amount of coins, which is created through inflation.<\/p>\n\n\n\n Some examples of where DPOS is used:<\/p>\n\n\n\nProof of Work<\/h2>\n\n\n\n
Proof of Stake<\/strong><\/h2>\n\n\n\n
Delegated Proof of Stake<\/strong><\/h2>\n\n\n\n