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5 Blockchain Consensus Algorithms You Should Know

Unlike current data transmission systems, blockchain lacks central administration and is widely distributed. One of the most popular features revolves around the theory that the more distributed the network is, the less likely it will be to have one point of failure. In other words, the network should be impermeable to DoS attacks and other tactics used to take down servers.

The legitimacy of transactions is verified and relayed using consensus mechanisms. These mechanisms are defined by a pre-determined set of rules that must be followed, maintaining consistency among nodes and securing the validity of recorded information. In this blog, we will compare five different blockchain consensus you should be familiar with.

1

Proof of Work (PoW)

The proof of work is the most common consensus introduced in 2009 in which crypto miners compete to win the right of adding blocks to the blockchain by solving complex computational problems. To accomplish this, miners use high-powered/high-capacity computers to ensure computations are solved and data is transmitted with highest level of security. In return, they earn cryptocurrencies.

Cryptocurrencies that use PoW consensus include Bitcoin, Dogecoin, Litecoin, etc.

NOTE: In PoW, mining equipment is expensive and results in enormous energy consumption. Albeit good can be found in anything, as the great state of Texas is currently considering welcoming PoW miners to help with their power grid woes.

Texas is becoming the world capital for Bitcoin mining—and 7 companies are fighting for territory

2

Proof of Stake (POS)

In Proof of Stake (PoS) consensus, network participants stake cryptocurrencies in favor of a block to be validated. In other words, crypto holders vote to approve transactions. The more coins they pledge, the more voting power they have. In return, they earn crypto rewards.

PoS is less energy consuming than PoW and as an added bonus it doesn’t require expensive equipment to get started. However, it is not regarded as secure as PoW.

PoS was first used for Peercoin in 2012. Cryptocurrencies that use PoS consensus include Cardano, Polkadot, Solana, and soon to be Ethereum.

3

Proof of Autonomy/Authority (PoA)

Proof of authority is a consensus mechanism where participants are identified as validators and they receive authority to solve blocks that they consider legitimate. Validators earn incentives to retain their power.

PoA is considered to be more robust than PoS since it requires verification of validators. Misuse of the network could result in validators being booted from the their lucrative position. While this consensus does not require much energy during its operation, it is less anonymous [for miners] than the two previously discussed consensus algorithms.

The term PoA was first proposed in 2017 by Ethereum co-founder Gavin Wood. Ethereum testnets Kovan, Rinkeby and Goerli use PoA consensus. VeChain is the most notable platform using this protocol.

4

Proof of Relay (PoR)

Proof of Relay is a consensus used for both transaction verification and token mining. It is relatively new in comparison to the previously mentioned algorithms. This protocol within itself benefits the entire network by providing and/or strengthening transmission power. Imagine being able to tap into your neighbors unused bandwith by paying 75% less than your wifi bill, in cryptocurrency. Nodes are rewarded for data transmission and competition between nodes drives the system towards low latency.

PoR responds to network congestion and increases the response rate. It consumes little electricity. The term was first used in Verizon wireless advertisements before being adopted by blockchain users. It is most notably associated with NKN and Mavens.

5

Proof of Location (PoL)

Proof of Location consensus enables the physical location [coordinates] of a device to be counted as proof of value. This consensus is usually employed in cryptocurrency geomining systems. The big idea here is to have a user-validated GPS network, with participants being rewarded in cryptocurrencies. The most notable user of PoL protocol is FOAM, who aims to give users control over their location data.

PoL restricts fake check-ins by verifying the location claim, proving to be more reliable than current spoofable systems. Think of a distributed, user-validated, Waze and you will have a layman understanding of PoL. PoL protocol consumes energy comparatively to PoW or PoS.

The Bottom Line

Each protocol serves a specific purpose. PoW, PoS, PoA, PoR, or PoL, each have their unique advantages and drawbacks. Each draws in investors to participate and passively earn cryptocurrency as a reward. What’s better than a source of passive income?

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Neal Grayson

Digital Investor. Premium digital real estate available to purchase, lease, lease-to-own, and in select cases, co-develop. ₿ accepted View my curated list of descriptive names & submit qualifying offers using the link below.

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