In the previous part, we focused on the legacy consensus mechanisms and how they can be used in the new world of blockchain and cryptocurrencies with its higher both amounts of enthusiasts and decision-making demand. This part will give you a brief look at other consensus algorithms that have been making the news for some time but haven’t been widely adopted yet.
Proof of Capacity
Proof of Capacity means that instead of buying into the concept of expensive hardware to be able to mine, you ‘pay’ in storage space. It essentially means that you have a higher chance of adding the next block and earning the reward with an increased hard disk capacity.
This algorithm introduced, the concept of ‘plots’ which you store on your hard drive prior to the start of a mining session. These are nothing but data sets in the form of, for example, hard-to-pebble graphs which are used in a variation known as Proof-of-Space. The mining algorithm is quite complicated and the block times, so short, that the solutions must be saved on the hard drive ahead of time. This article again explains PoS and PoW and how PoC is now beating them at their game.
Proof of capacity contains two distinct parts in the plotting or creating the plots file and the actual mining for the blocks. The size of your hard drive is the defining factor in how much time it will take you to develop the plot files. This ranges from days to even weeks.
Pros: environment-friendly to a high extent
Cons: prone to nothing-at-stake attacks
Popular Coins: Burstcoin (BURST), Chia, SpaceMint.
Delegated Byzantine Fault Tolerance
This algorithm works on the process of electing delegates for the participants. These delegates are responsible for the effective handling and carrying out of their voters’ demands. One of the delegates is randomly chosen as a Speaker, and that’s how DBFT deals with decisions. The speaker listens to all of the demands and concludes a decision that is then confirmed by all the participants i.e. whoever owns the coins of that particular chain. These are also known as ordinary nodes.
To become a delegate or a ‘bookkeeping node’, one needs to satisfy certain conditions with respect to the internet connection, special equipment etc. The demands are nothing other than the different transactions made by token holders. The decision to be made is which block to add to the blockchain and the agreement is the hash of current block.
This works in a top-down manner where the speaker passes down his calculations to the delegates who make their own calculations and cross check it. And the process repeats.
Pros: organized and efficient
Cons: if speakers or delegates are malicious, it could lead to forking
Popular Coins: Neo (NEO)
Proof of Activity
Proof of Activity was introduced to curb the speculations about the potential security issues where people might act in a selfish manner and ruin the Bitcoin blockchain system. This essentially came out during the revelation that to avoid a currency flood in the Bitcoin system There will be only around 21 million Bitcoins emitted, and the mining would pretty much stop after all of them are mined unless there is a change in protocol that would allow for a larger supply. This would mean that Bitcoin miners would have to look for other coins to mine or just depend on the transaction fees for their income which is not that feasible in the long run.
Proof of Activity is essentially an alternative structure for Bitcoin and is a mix of two of the most popular consensus mechanisms – Proof of Work and Proof of Stake. This mechanism works by starting off in a Proof of Work manner where miners essentially solve a cryptographic puzzle and claim their reward if they’re successful. The difference lies in the fact that the mined blocks are just headers and mining reward addresses instead of containing transactions.
Once this almost empty block is mined, the mechanism changes to follow a proof of stake protocol. The information that is in the header is then used to choose random validating parties/users to sign the block. These parties are the actual coin holders or stakeholders and as is the case in Proof of Stake, the larger the stake held, the greater would be their chance of being selected to sign the new block.
Pros: more secure than both the algorithms that make up the mechanism
Cons: inherits the downside for both Proof of work and Proof of Stake in terms of high resources used and malicious validators
Popular Coins: Decred (DCR), Espers (ESP).
Proof of Burn
Proof of Burn runs parallel to the concept that it is impossible for anyone to delete data from a blockchain. So the concept to be invented was to ‘burn’ coins. Now, this being an electronic media and everything, people don’t literally set their rigs on fire but instead, the underlying concept of irretrievability comes into play. This means sending tokens or essentially, coins in a particular currency owned by the miner, to an address that is a verifiably unspendable address which gives the sender a lifetime privilege to mine on the system. This works in the form of virtual mining rigs that the user procures to get a chance to be picked for the mining.
The selection process is said to be random but at the same time, it is also said that the more coins user burns, the better his chance of being selected to mine the next block is. This is somewhat similar to the Bitcoin process where the investment lies in the computing power that needs to improve for better hashrates. Here the investment is on building rigs, but virtually. So you spend coins by burning them to buy more advanced virtual mining rigs.
As time passes and with more and more stakeholders coming in, your stake in the system starts to decrease. So that will eventually you lead to burning more coins to keep up with your higher stakes.
Pros: lesser energy consumption, better security
Cons: too many resources and coins wasted to invest in virtual rigs
Popular Coins: Slimcoin (SLM)