3.3 Alternative Consensus Mechanisms

Blockchain networks are exploring alternatives to Proof of Work. These new consensus mechanisms aim to improve speed, energy efficiency, and scalability while maintaining security. From stake-based systems to Byzantine fault tolerance, each approach offers unique benefits and trade-offs.

Directed Acyclic Graphs (DAGs) represent a radical shift from traditional blockchain structures. By allowing multiple chains of transactions to coexist and interlink, DAGs promise faster processing and greater scalability. This innovation could reshape how we think about decentralized networks.

Consensus Mechanisms Based on Stake

Delegated Proof of Stake (DPoS)

• Stakeholders vote to elect delegates or witnesses to validate transactions and create new blocks
• Delegates take turns creating blocks in a predetermined order
• Enables faster transaction speeds and block creation compared to traditional Proof of Stake (PoS)
• Reduces the number of nodes required to validate transactions, improving scalability
• Used by platforms such as EOS, Tron, and Lisk

Proof of Authority (PoA) and Proof of Capacity (PoC)

• Proof of Authority (PoA) grants block creation rights to approved accounts or nodes, known as validators
  • Validators are chosen based on their reputation and are required to undergo a rigorous screening process
  • Suitable for private or consortium blockchains where trust is established among participants
  • Offers high transaction throughput and low latency
• Proof of Capacity (PoC) selects validators based on their available hard drive space
  • Miners allocate a portion of their hard drive space to store "plots" of data
  • The more storage space a miner allocates, the higher their chances of being selected to create a new block
  • Encourages decentralization by allowing participation from a wide range of users with varying computing power

Proof of Burn (PoB)

• Miners compete by "burning" or destroying a specified amount of cryptocurrency
• The burning process involves sending the coins to an unspendable address, effectively removing them from circulation
• Miners with a higher amount of burned coins have a higher probability of being selected to create the next block
• Burning coins demonstrates the miner's commitment to the network and helps prevent frivolous block creation
• Reduces the energy consumption associated with mining as it does not require continuous computational work

Byzantine Fault Tolerant Consensus Mechanisms

Practical Byzantine Fault Tolerance (pBFT)

• Designed to reach consensus in the presence of malicious or faulty nodes, known as Byzantine nodes
• Tolerates up to 1/3 of the total nodes being Byzantine
• Consists of three phases: pre-prepare, prepare, and commit
  • In the pre-prepare phase, a primary node proposes a new block
  • During the prepare phase, nodes validate and broadcast their agreement on the proposed block
  • In the commit phase, nodes confirm the block if a supermajority (2/3 or more) of nodes have agreed on it
• Offers high transaction throughput and low latency, making it suitable for private or permissioned blockchains

Federated Byzantine Agreement (FBA)

• Nodes in the network form "quorum slices," which are subsets of nodes that they trust
• A node reaches agreement on a transaction if a threshold of its quorum slices agrees on the transaction
• Consensus is achieved when a sufficient number of nodes agree on the same transaction
• Allows for flexible trust relationships among nodes, as each node can choose its own quorum slices
• Implemented in the Stellar Consensus Protocol (SCP) used by the Stellar blockchain

Consensus Mechanisms Using Directed Acyclic Graphs

Directed Acyclic Graph (DAG)

• Transactions are represented as vertices in a graph, with edges representing the direction of confirmation
• Each new transaction confirms one or more previous transactions by referencing them
• Consensus is achieved through a process called "transaction ordering" or "transaction solidification"
  • Transactions with a higher number of confirmations (i.e., more edges pointing to them) are considered more trustworthy
  • As the DAG grows, the transaction history becomes increasingly immutable
• Enables high scalability and fast transaction confirmation times
• Examples of DAG-based platforms include IOTA, Nano, and Hedera Hashgraph