For the past 10 years since Bitcoin was introduced to the world, people all around the globe have more or less got used to some classic model of cryptocurrency existence. Cryptocurrency is a reward method for maintaining the work of the blockchain network. Blockchain network is a decentralized ledger. Maintaining the blockchain along with obtaining the cryptocurrency is called “mining” and demands significant hardware performance.
Yet there is one point missing in this model – consensus mechanism, or method. The consensus is aimed at reaching a fair agreement for all parties involved. In part, it does an essential thing – ensures the validity of the next block in the blockchain. It mainly focuses on solving what is called the “Byzantine Generals Problem” in decentralized peer-to-peer currency systems.
Most of the blockchain networks and cryptocurrencies in the field are using Proof of Work consensus mechanism. In PoW, miners strive to add the next block in the chain by competing to solve difficult, albeit useless problems and the first one to reach is awarded for his efforts in the form of newly mined coins. It works on the principle that “the longest chain wins” which essentially goes to show that the chain which has the most number of productive miners would grow faster and be reliable.
However, different blockchains are using different mining algorithms, even though they are based on the same consensus method.
One of the most well-known PoW mining algorithms is SHA-256, just because it’s an algorithm of the cryptocurrency king – Bitcoin. It’s a “classic”, bulletproof hashing algorithm, however, it has one significant con – ASIC-tolerance.
Another example of a popular PoW-based hashing algorithm is Ethash, which is used among the Ethereum network. It also has no ASIC-resistance, despite it used to be for a long time before. Starting from early 2018, Ethereum developers planned to organize migration of the network on the Proof of Stake consensus, however, this process is difficult and resource-demanding, so the migration is still to be organized.
The last, but not the least hashing algorithm in this top-3 is CryptoNight. It was initially introduced by the Bytecoin developers and stands for the maximum possible privacy and security of the network. With zero-knowledge proofs and high-end cryptography, this algorithm won hearts of cryptocurrency enthusiasts all over the world.
But cryptocurrency world doesn’t stand still and there are new hashing algorithms appearing in the field. There are dozens of various new hashing algorithms, based on the Proof of Work consensus mechanism, with their own pros and cons. However, one of the major trends of all PoW-based algorithms is privacy and scalability. A great example here is a Grin coin with its MimbleWimble hashing algorithm, providing a superior level of privacy, security, and scalability.
Someone will say, that Proof of Work-based mining is a relic of the past and the future is for Proof of Stake, but as long as mining exists and Bitcoins are still left – Proof of Work is going to live and bring new hashing algorithms, continuously improving and becoming more advanced day to day.