What are the different consensus algorithms?

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What are the different consensus algorithms?

In the field of cryptocurrencies and digital assets using blockchain more generally, consensus algorithms are used to ensure the integrity and security of systems. If the first one designed was the PoW or Proof of Work algorithm, there are several today that can be differentiated. Each crypto protocol is therefore likely to have a consensus algorithm rather than another.

What is a consensus algorithm?

The consensus algorithm is the means by which the blockchain is likely to reach consensus. This applies in particular to public blockchains since they do not depend on a central authority for the validation of transactions. They are what we call distributed nodes that are governed by a consensus algorithm that will have to agree to validate a transaction. The role of the consensus algorithm is to ensure that the rules have been respected.

Not to be confused with a crypto protocol

Sometimes the consensus algorithm is referred to as a crypto protocol and this is not entirely accurate. The crypto protocol brings together the set of rules of the blockchain with the algorithm being the mechanism that makes sure they are followed. The crypto protocol is therefore more general and the algorithm more specific, although they both remain closely related within the blockchain.

The different types of consensus algorithms

Once a crypto protocol has been defined, a consensus algorithm will have to be implemented to ensure that it is respected. Today, there are several of them with notable differences.

PoW or Proof of Work

PoW is the first consensus algorithm created to enforce the blockchain's crypto protocol. Used by Bitcoin, it requires a lot of computing power, as it relies on a hash function. It will calculate a unique fingerprint needed to validate the block from the data provided. This hash work rewards the miners who provide the computing power.

PoS or Proof of Stake

Developed in 2011, PoS is an alternative method to PoW by removing the concept of physical mining and opting for virtual mining which is notably less energy consuming and therefore more ecological. In the case of cryptocurrencies, the PoS chooses randomly among the eligible users the one who will have the right to validate the block. A pledged proof must then be provided.

PoA or Proof of Authority

Like the PoW and many others, the Proof of Authority (PoA) is a consensus algorithm whose purpose is to implement the blockchain protocol. It allows to validate transactions and other interactions with the network, but also to update its more or less distributed register. This right is given to a limited and designated number of actors.

Indeed, one or more machines will have the role of generating each block of transactions that will be included in the blockchain. Each block can then be accepted without verification, either unanimously or by a majority, depending on the chosen configuration. This explains why a number of validators are defined and designated from the outset for this purpose.

Other algorithms

More than PoW and PoS, there are other consensus algorithms dedicated to apply a crypto protocol such as :

  • PoET (Proof of Elapsed Time) which uses a particular technique to limit the use of resources (the allocation of block validation is done on a fair lottery system).
  • PoI (Proof of Importance) which is based on the use of blockchain, seniority and other criteria.
  • PoA (Proof of Activity) which is based on the actual activity of the miner.
  • PoC (Proof of Capacity) which is based on the computing capacity of the miner.

To enforce a crypto protocol, there are therefore a multitude of possibilities that can be considered in terms of consensus algorithm. All that remains is to turn to the blockchain that has the algorithm that best suits your needs.