The Blockchain Consensus Algorithm

01-Introduction

In understanding the blockchain consensus algorithm, we must first understand the concept of a blockchain. We know that a blockchain is a distributed decentralized network that provides immutability, privacy, security and transparency. There is no central authority or intermediary present to validate and verify the transactions, yet every transaction in the blockchain is considered to be completely secured and verified. This is possible only because of the presence of the blockchain consensus algorithm which is a core part of the blockchain.

The blockchain consensus algorithm is a mechanism that allows users or machines to coordinate in a distributed setting.It is a procedure through which all the peers of the blockchain network reach a common agreement about the present state of the distributed ledger, therefore achieving reliability and establishing trust between unknown peers in a distributed computing environment.

It is through a consensus algorithm that each node verifies the authenticity of the new entry which is to be added in the blockchain ledger. Using the blockchain consensus algorithm, each node reaches a common agreement on the authenticity of any transaction and once it is verified, the entry of the transaction is added to the blockchain ledger. The blockchain consensus algorithm consist of some objectives such as coming to an agreement, collaboration, cooperation, equal rights to every node, transparency etc.

02- Types of Blockchain Consensus Algorithm

There are various blockchain consensus algorithms which are listed below but in this article, we will discuss one. The blockchain consensus algorithms include;

• Proof of Work (POW): This consensus algorithm is used to select a miner for the next block generation. In proof of work, validators (referred to as miners) hash the data they want to add until they produce a specific solution.

A hash is a seemingly random string of letters and numbers that is created when you run data through a hash function. If you run the same data through it again, you will always end up with the same output, change even one detail and the hash will be completely different.

In proof of work,the protocol sets out conditions for what makes a block valid. It might say for instance, only a block whose hash begins with 00 will be valid. The only way for the miner to create one that matches that condition is to brute-force inputs until they get the right hash.

With major blockchains, the bar is set incredibly high. To compete with other miners, you would need a warehouse full of special hashing hardware (ASICs) to be in with a chance of producing a valid block.

Your stake when mining is the cost of these machines and the electricity required to run them. ASICs are built for one purpose, so they have no use in applications outside of cryptocurrency mining. So the only way to recoup the initial investment is to mine, which yields a significant reward if you successfully add a new block to the blockchain. But if you produce an invalid hash, your stake which is your time and electricity, will be wasted. It is therefore more profitable to act honestly than dishonesty.

Other consensus algorithms include;

• Proof of Stake

• Proof of Burn

• Proof of Capacity

• Leased Proof of Stake

• Practical Byzantine Fault Tolerance (PBFT)

• Proof of Elapsed time etc.

03- Conclusion

Mechanisms for achieving consensus are vital to the functioning of distributed systems. It is therefore important to wisely choose one in regards to the business network requirements because blockchain networks cannot function properly without the consensus algorithms to verify each and every transaction that is being committed.