Question

Describe blockchain technology and their Consensus algorithms (proofs).

Answer 1

A blockchain is a time-stamped series of immutable record of data that is managed by cluster of computers not owned by any single entity. Each of these blocks of data are secured and bound to each other using cryptographic principles . The blockchain is a simple yet ingenious way of passing information from A to B in a fully automated and safe manner. A blockchain carries no transaction cost.

A consensus algorithm is a procedure through which all the peers of the Blockchain network reach a common agreement about the present state of the distributed ledger. A consensus algorithm aims at finding a common agreement that is a win for the entire network.
The Different Types of consensus Algorithms are:-

1. Proof of Work (PoW):
Proof of work is the first Blockchain algorithms introduced in the blockchain network. Many blockchain Technologies uses this Blockchain consensus models to confirm all of their transactions and produce relevant blocks to the network chain.The decentralization ledger system collects all the information related to the blocks. However one needs to take special care of all the transactions blocks.
This responsibility falls upon all the individual nodes called miners and the process they use to maintain it is called mining. The central principle behind this technology is to solve complex mathematical problems and easily give out solutions.

2.Proof of Stake:

Proof of stake is a consensus algorithm blockchain that deals with the main drawbacks of the proof of work algorithm. In this one, every block gets validated before the network adds another block to the blockchain ledger. There is a little bit of Twist in this one. Miners can join the mining process using their coins to stake.
The proof of stake is a new type of concept where every individual can mine or even validate new blocks only based on their coin possession. So, in this scenario the more coins you have, the better your chances are.

3.Delegated Proof-of-Stake:
Delegated Proof of Stake is a variation of the typical proof of stake. The system is quite robust and adds a different form of flexibility to the whole equation.
If you want fast, efficient, decentralized consensus algorithms then Delegated Proof of Stake would be the best way to go. The issue of the stakeholders gets fully solved here in a democratic way. Every component on the network can become a delegate.

4.Leased Proof-Of-Stake:
Another twist to the classic Proof of Stake is the leased proof of stake. The new consensus algorithm blockchain was introduced to us by Waves platform. Just like any other blockchain technology platform, Waves also ensures to offer a better catch with a limited amount of power consumption.
The original proof of stake had some limitations for staking. Individuals with a limited amount of coins might never actually participate in the staking ever. To maintain the network successfully, only a handful of an individual with more coins to offer is left behind.

5.Proof of Elapsed Time:
PoET is one of the best consensus algorithms. This particular algorithm is used mainly on permissioned blockchain network where you’ll have to get permission for accessing the network. These permissions networks need to decide on the mining rights or voting principles.
To make sure that everything runs smoothly the PoET algorithms uses a particular tactic for covering transparency into the whole network. The Consensus algorithms also ensure a secure login into the system, as the network requires identification before joining the miners.

6.Proof-of-Activity:
While people were debating the topic – Proof-of-Work vs. Proof-of-Stake, the creator of Litecoin and three other authors thought of something brilliant. They asked the world a simple question – why can’t combine the PoW and PoS instead of making them battle each other?Thus, the idea of a fascinating hybrid came to the world – Proof-of-Activity. It combines the best two features – more secured against any attack and not a not power-hungry system.

7.Proof-of-Importance:
This consensus example came to be because of the famous name of NEM. The concept is a development of the Proof-of-Stake. Although, NEM introduced a new idea – harvesting or vesting.
The harvesting mechanism determines whether a node is eligible to be added to the blockchain or not. The more you harvest on a node, the more chances it gets to be added on the chain. In return for the harvesting, the node receives the transaction fees that the validator collects as the reward. To be eligible to harvest, you need to have at least 10,000 XEM on your account.
It solves out the major problem of Proof-of-Stake. In PoS, the richer gets more money compared to the validators having less money. For example, if you own 20% of the cryptocurrency, you can mine 20% of all the blocks on the blockchain network. This makes the consensus algorithms favorable to the wealthy.

8.Proof-of-Capacity:
Proof-of-Capacity consensus example is an upgrade of the famous Proof-of-Work blockchain consensus protocol. The essential characteristic of this one is the “plotting” feature. You will have to devote your computational power and hard drive storage even before you are starting to mine.
This very nature makes the system faster the PoW. The Proof-of-Capacity can create a block in just four minutes whereas the Proof-of-Work takes ten minutes to do the same. Moreover, it tries to tackle the hashing problem of the PoW system. The more solutions or plots you have on your computer, the better your chances are to win the mining battle.

9.Proof-of-Burn:
This consensus sequence is quite impressive. To safeguard the PoW cryptocurrency, a portion of the coins will be burnt! The process happens as the miners send a few coins to an “Eater Address.” The Eater Addresses cannot spend these coins on any purpose. A ledger keeps track of the burnt coins making them genuinely unspendable. The user who burnt the coins will get a reward as well.
Yes, the burning is a loss. But the damage is temporary as the process will safeguard the coins in the long run from the hackers and their cyber-attacks. Moreover, the burning process increases the stakes of the alternative coins.
Such a scenario increases the chance of a user to mine the next block as well as increases their rewards in the future. So, burning could be used as a mining privilege. The counterparty is an excellent consensus example of a cryptocurrency that uses this blockchain consensus protocol.

10.Proof-of-Weight:
This is a big upgrade of the Proof-of-Stake algorithm. In Proof-of-Stake, the more token you own, the better your chances are to discover more! This idea makes the system a bit biased.
Well, the Proof-of-Weight tries to solve such biased nature of the PoS. Cryptocurrencies like Algorand, Filecoin, and Chia implement the PoWeight. The Proof-of-Weight considers some other factors than owning more tokens like in PoS.
These factors get identified as the “Weighted Factors.” For example, Filecoin considers the amount of IPFS data that you have and weights that factor. Some of the other factors include but not limit to Proof-of-Spacetime and Proof-of-Reputation.
The fundamental advantages of this system include customization and scalability. Although incentivizing could be a big challenge for this consensus algorithm.