Blockchain Consensus Study

Rachit Srivastava
4 min readAug 14, 2021

The Blockchain space is a highly growing industry. From a simple whitepaper published in 2009 by an anonymous entity, Satoshi Nakamoto, fixing/disrupting the finance system, preserving the artworks … and so much more !!!!

The Blockchain space, for years, had several issues when it came to scalability, decentralization, and performance aka the Blockchain Trilemma Problem.

This article will cover the 3 most famous architecture at the time of writing:
1. Proof of Work ( POW ) — Bitcoin, Ethereum 1.0, Litecoin, Dogecoin
2. Proof of Stake ( POS ) — Ethereum 2.0, HarmonyONE, Algorand
3. Proof of History ( POH ) — Solana ( The only consensus which claims to resolve the Blockchain Trilemma )

There are other solutions like Proof of Authority and Proof of Transfer, which we won’t cover in this article.

So, let's dive deeper :)

Proof Of Work

Most security focuses on consensus and the consensus which market the beginning of this industry. The consensus was introduced by an anonymous entity names Satoshi Nakamoto in 2009, giving birth to Bitcoin.

This consensus derives its security from the computational power of the miners. Miners are nodes ( or computer machines simply ) that do some mathematical calculation to solve a given problem. The first machine to complete the calculation of the problem gets rewarded if the result it gave is correctly verified by the other participating nodes in the network. Yes, Bitcoin is the reward that the miner on the bitcoin network receives. Since there is a race among the minors, to do the computation as fast as possible, more and more power is required to run the hardware required to run the system.

The Blockchain Trillema:

If the focus is entirely on Security and Decentralization, then the cost is Scalability. Hence Bitcoin Blockchain takes around 10 minutes to complete a transaction, and Ethereum 1.0 takes around 3 minutes.

To fix this issue, there are several scaling solutions have been developed. Lighting Network for Bitcoin is a great example. Similarly, Optimistic Rollups, ZK-Rollups, State Channels, Sidechains, Plasma. Taking a deep dive into these solutions is another article in itself :)

If you are interested in visualizing the working of simple pow Blockchain, checkout -> https://andersbrownworth.com/blockchain.The nonce is the math value to be calculated.

Proof Of Stake:

Proof of Stake is relatively a new solution, which aims to make scalable blockchains.

The nodes ( simply computers ) stake an amount of cryptocurrency to become candidates to validate new blocks and earn rewards from them. The algorithm, based on the quality of stake and other factors like, coin-age, randomization, etc., chooses from the candidates' nodes, the node which will validate the new block.

Since the computing node is determined algorithmically, over competitiveness, results in fewer hardware requirements, and consequently more power efficiency. Ethereum aims to migrate to POS by the end of 2021.

There are several variations in the implementation of course. Most of the implementation/innovation is done in the algorithm which determines the elected node. A good example of an algorithm is Effective Proof of Stake.

An important term to know when it comes to POS architecture is Sharding. Ethereum 2.0 aims to have 64 shards. The question is what is sharding?
Sharding is basically dividing one blockchain into several chains, which will interact with each other using the main chain called the “Beacon Chain”. These other chains are simply called “shard chains” or simply “shard”.
For better understanding, imagine a bank. 100 people want to take out some cash from their accounts. If they all assemble at the branch office it will take a long time. To fix that, there are several ATMs installed, let's say 4, so now, people can go in groups of 20 to these ATMs and get their cash faster. The bank branch only has 20 people to deal with now, but at the same time acts as the body responsible for keeping track of all the 100 customers. The ATMs are the ‘shards’ and the bank branch is our ‘beacon chain’.

P.s Using banks as an example, since any reader new to this space can easily understand. Defi >> Banks anytime :)

Proof of History

This is indeed one of the most innovative approaches to solve the Blockchain Trilemma problem. Introduced by Solana, This consensus has been a highlight for its highly effective result.

Both POW, POS have a very high Block Time because the message needs to be majority ( > 50%) nodes, to get added to the block. Some innovative solutions target this in POS ( like Harmony.One 2 seconds finality). So POH aims to solve this using time cryptographic timekeeping.

Definition by SolanaLabs: “The Proof of History is a high-frequency Verifiable Delay Function. A Verifiable Delay Function requires a specific number of sequential steps to evaluate, yet produces a unique output that can be efficiently and publicly verified.”.

Don’t worry if you don't get that. Let's take another imaginative scenario to understand this one.

Imagine a person in a restaurant, having served a coffee. The restaurant has 5 other customers who come at intervals of 30 seconds, and on entering just take a picture of the coffee mug. Now after the person completes drinking his coffee, if we combine all the pictures taken by the customers, we can see the order in which the pictures would be arranged ( simply by observing the amount of coffee left ). This gives a precise order of time. So every picture is a precise idea of time. So the picture can be compared to a block and combined with the ordering of photos ( blocks ), is Proof of History.

Hope this article gives you a clear picture of the main consensus in use right now and a slight idea of how early this space is 😀. For more consensus study try -> https://tokens-economy.gitbook.io/consensus/

Lastly, connect with me on Twitter, for any help, or for learning about the latest happenings in this crazy space.

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