It’s still warm in memories, the way that the implementation to implement the Proof of Work consensus on Bitcoin blockchain was able to turn crypto enthusiasts disengaged from the leader of cryptocurrency assets. The reason is that the consensus method of Proof of work is considered to be not sustainable since it uses a significant amount of energy.
Sometimes, changes or any other aspect related to these two issues attract interest from the cryptocurrency community. However, since blockchain technology is an integral part, any developments could inevitably create a need for a crypto asset practitioner to take a different approach or even exclude cryptocurrency assets on the Blockchain.
Recognition of the Consensus Algorithm
In short, it is the method utilized by blockchain and computers systems to agree on the addition of data in the system.
The ledger is open and is visible to everyone; however, it is very difficult to modify. Therefore, blockchain users are unable to modify the transactions contained within it. However, they are able to add a new transaction block. But, the newly added block will only be added when the consensus algorithm agrees with the inclusion of the new transaction.
So, why is this procedure necessary in a blockchain-based system?
So, as we all know, no one authority oversees the activities of the world of exploring cryptocurrency. The mechanisms are decentralized until the decision-making and verification, and authentication within the Blockchain have to include the entire population of users that are part of the system.
However, the fact that it involves hundreds of thousands or millions of users requires a fair, effective, and reliable process to ensure that all parties taking part in it have an equal “voice.” For that, it is necessary to have a consensus algorithm for the system of Blockchain.
It is also the only source of information regarding whether transactions executed by the user are authentic or fake. However, this prevents the users from recording their transactions in two places, often referred to as double-spending.
Different kinds of Consensus Algorithms
1. The Proof of work
Consensus Proof of Work is the “father” of all types of consensus algorithms. The algorithm was initially used in the Bitcoin blockchain and later adopted by most early-generation altcoins.
In the Proof of Work concept, miners function as authenticators of transactions. They are able to add blocks to the Blockchain when they can solve difficult mathematical problems. If they succeed, they can provide “proof of their hard work” (aka evidence of their work) and then create a new block.
Unfortunately, this type of algorithmic process can result in massive costs. Every miner requires a reliable computer system to be competitive with other miners in mining cryptocurrency. In the meantime, they must spend a lot of money to purchase the equipment.
Not just hardware investments as well, they also need to cover the cost of electricity. But, again, this is due to the puzzle-solving process could take quite a long time.
A different consensus method can be described as Proof of Stake (PoS). This algorithm is used by the newer coins like Cardano and Ethereum as it is later upgraded into Ethereum 2.0.
In the Proof of Stake system, validated parties do not have to buy hardware. However, in exchange for this, they must invest in crypto instead. Why is this?
Proof of Stake is a concept in which an individual can mine or verify transactions in cryptocurrency based on the number of coins that the person holds. This means the more coins miners hold thus the higher the bargaining power when mining crypto assets.
Contrary to Proof of work, which requires a sophisticated machine, however, Proof of stake can be done using a standard computer. However, it is essential to protect your cryptocurrency with an account. The coins can eventually be utilized to determine whether a new transaction merits being registered in the Blockchain or not.
If the trade is approved, the validator will be paid a sum in the form of fees. Suppose the validating person attempts to behave in a manner that is not appropriate and uses the money to the stake; the money could be stolen.
The process is regarded as quicker and cheaper over PoW consensus. This is what makes ADA enjoy high trust from crypto investors so that it will be among the top 10 cryptocurrency by the market value of cryptocurrency assets.
3. Delegated Proof of Stake (DPOS)
DPOS (Delegate Proof of Stake), which is delegated or utilizes democratic voting systems like it was discovered in the hands of a Blockchain developer known as Dan Larimer, founder of Blockchain Bitshares, Steem and Eos, Vexanium Based Blockchain makes use of an algorithm called consensus (DPoS) to determine active Block producers that will be legally authorized to validate the correctness of blocks within Blockchain. Blockchain network.
However, on the Vexanium Blockchain, the DPOS process takes place at Layer 2 and is only half the process part of the Vexanium consensus. The remaining half is involved during the process of verifying each block until it’s final (irreversible). This is done using asynchronous byzantine fault tolerance (aBFT).
Of the various types of consensus discussed above, the next consensus algorithm makes the character of the blockchain system adaptable. There is no consensus on a single blockchain algorithm that claims to be perfect or the most beneficial. Each consensus comes with its benefits. This is the appeal of Blockchain technology. It’s different to come to an arrangement (deal) through an algorithmic system of mathematical computation.
The group of validates who wish to sign or validate blocks will be randomly chosen according to header information. A validator who holds an increasing number of coins is eligible to be chosen as a signer. When all validators have verified the new block, the status of the Blockchain is different from the block that was discovered to a complete block.