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Blockchain Consensus Models

Permissioned Blockchainsa Quest For Consensus

Permissioned Blockchainsa Quest For Consensus

February 14, 2018 by Bernadette Kogler , Timothy Willis in Data & Analytics Permissioned BlockchainsA Quest for Consensus Conspicuously absent from all the chatter around blockchains potential place in structured finance has been much discussion around the thorny matter ofconsensus. Consensus is at the heart of all distributed ledger networks and is what enables them to function without a trusted central authority. Consensus algorithms are designed to prevent fraud and error. With large, public blockchains, achieving consensusensuring that all new information has been examined before is universally acceptedis relatively straightforward. It is achieved either by performing large amounts of work or simply by members who collectively hold a majority stake in the blockchain. However, when it comes to private (or permissioned) blockchains with a relatively small number of interested partiesthe kind of blockchains that are currently poised for adoption in the structured finance spacethe question of how to obtain consensus takes on an added layer of complexity. Restricting membership greatly reduces the need for elaborate algorithms to prevent fraud on permissioned blockchains. Instead, these applications must ensure that complex workflows and transactions are implemented correctly. They must provide a framework for having members agree to the very structure of the transaction itself. Consensus algorithms complement this by ensuring that the steps performed in verifying transaction data is agreed upon and verified. With widespread adoption of blockchain in structured finance appearing more and more to be a question ofwhenrather thanif, SmartLink Labs, a RiskSpan fintech affiliate, recently embarked on a proof of concept designed to identify and measure the impact of the techn Continue reading >>

The World Of Blockchain Consensus Protocols

The World Of Blockchain Consensus Protocols

In distributed ledgers, a consensus mechanism is the way in which a majority, (or, in some mechanisms, all) of network members agree on the value of a piece of data or a proposed transaction, which then updates the ledger. In other words, a consensus mechanism is a set of rules and procedures that mains a coherent set of facts among the participating nodes. The consensus mechanism is a vital feature of a blockchain as it ensures that all participants of a distributed ledger are on the same page and enables the network to keep functioning even if some of its members are failing. In this article, we introduce the main consensus mechanisms used by leading digital currencies and tokens. The most commonly used consensus mechanism is the Proof-Of-Work protocol used by the first-ever cryptocurrency, bitcoin . For a blockchain that uses the Proof-Of-Work protocol transactions are confirmed by miners, who are required to make lengthy trial and error computations until a consensus is reached to verify that a transaction a valid. For using their computational power to confirm transactions and to maintain the peer-to-peer network miners are rewarded with new bitcoins. Cryptocurrencies that are using the Proof-Of-Work protocol include bitcoin, litecoin, dogecoin, and namecoin. The Proof-Of-Stake protocol differs from the Proof-Of-Work protocol as it makes mining new blocks easier for those who hold the highest amounts of the cryptocurrency. In other words, the stakeholders in a particular cryptocurrency network who have the greatest incentive to ensure the network runs smoothly will find it easier to do so. This feature of the Proof-of-Stake protocol creates an incentive for miners to consume their mined currency as opposed to converting it into fiat currency immediately upon minin Continue reading >>

Sapvoice: Blockchain Consensus Requires Evolutionary Change

Sapvoice: Blockchain Consensus Requires Evolutionary Change

Blockchain Consensus Requires Evolutionary Change By Claudio Brecht, Senior Reporter, SAP News Center Blockchain has long been resonating beyond the walls of the software industry. Every day, messages circulate about the development of the Bitcoin price index, while startups are competing to create the next earth-shattering business model based on this technology. Yet what do we really understand about it? At the peak of the 2008 financial crisis, an individual or a group of individuals acting under the pseudonym Satoshi Nakamoto sent a paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System to a mailing list. It contained a practical solution to a problem that had left virtual currency theorists scratching their heads: the Byzantine Generals Problem . Creating Consensus Among Decentralized Players The Byzantine Generals Problem originates in an historical legend at the time of Constantinoples fall to the Ottoman Empire in 1453. The fortified city could only be successfully overrun with help of carefully planned troop movements coming from various directions. To achieve this, the commanding Ottoman generals had to resort to communicating through messengers. However, the decision about the moment of attack was severely hampered by one key detail: As some of the generals wanted to discredit their colleagues to the sultan, they purposefully provided false information to instigate a premature attack. From that point on, none of the generals could be sure if the incoming messages were authentic. The crux of the problem was the issue of consensus, deriving from the fact that the individual decision-makers could not trust one another. The same situation applies to digital transactions of value. How can we reach consensus that a virtual dollar will not be paid out twice? Continue reading >>

Proof-of-stake (pos) Outperforms Bitcoins Proof-of-work (pow)

Proof-of-stake (pos) Outperforms Bitcoins Proof-of-work (pow)

Blockchain Advocate, interested in Governance & Consensus Models @Blockcentral_io. Really just a tech geek at heart! Proof-of-Stake (POS) outperforms Bitcoins Proof-of-Work (POW) Proof-of-Stake (POS) models are becoming highly desirable in Blockchain consensus designs, especially with the Casper upgrade underway for Ethereum, the second largest cryptocurrency by market cap. Yes, the immediate reason is that it is more energy efficient (reduces computational costs) as opposed to Proof-of-work (POW) which is highly resource intensive, but theres more. POS, in general, takes individual Digital Signature to prove ownership of the stake selected by the network, based on their proportional stake, in order to validate messages and transactions submitted to the database. If we look deeper, there are 2 main models that come under this category: Chain based; which offers availability as a validator is selected at random during a set time slot to create a block, which points to a previous block so that over time the blocks converge into one growing chain. This type is favoured for a more permisionless approach. Notable blockchain projects that implemented this model are Nxt, Peercoin, Ardor. Consortium consensus- Byzantine Fault Tolerance (BFT) protocol: which offers consistency as the validators randomly chosen for each round end up agreeing on whether or not the block becomes part of the chain. This type could be favoured for a more permissioned approach. Used by Neo, Tendermint, Polkadot, Hyperledge Fabric. Last week, the BFT consensus algorithm was a heated topic in the industry as the NEO blockchain came to a halt in the face of a disconnected node in the network, leaving other nodes waiting for a reply. The issue was solved with a forced changeview, i.e restarting all the n Continue reading >>

Sok: Consensus In The Age Ofblockchains

Sok: Consensus In The Age Ofblockchains

SoK: Consensus in the age of blockchains Bano et al., arXiv 2017 There are so many things to consider when evaluating a blockchain based technology / system. For example (and in no particular order): What cryptographic building blocks does it depend on? Does it offer privacy of identity (anonymity)? Does it offer privacy of data? Is data stored on chain or off chain? (I.e., separation of control plane and data plane). Is data recoverable by any participant at any time, or does the system just offer non-repudiation? What are the incentives for participants? What is the overall system throughput? What is the expected latency? What security guarantees does it provide? What is the threat model, and hence what attacks is the system open to? Related, what degrees of freedom do participants have? Who or what do you need to trust, and with what? How efficient is the system? Are smart contracts or other trusted application logic mechanisms supported? What is the consistency model (e.g., forks etc.)? Can fraudulent activity / participants be detected? How is system state recovered (if at all) if attacks are discovered after-the-fact? How fast does the blockchain storage requirement grow? How quickly can new participants bootstrap? What is the consensus model? And so on this was just off the top of my head as I sit here in the train, Im sure I missed a few let me know! These parameters are inter-twined of course, and of all of them, one of the most fundamental is the choice of consensus model, which has major impacts on many of the other design points. Weve touched quite a few parts of the elephant in previous editions of The Morning Paper (see blockchain related posts here ), but todays choice is a recent and very helpful SoK (Systematisation of Knowledge) looking at the variety Continue reading >>

Chain Documentation

Chain Documentation

In this guide we discuss the design of the federated consensus protocol used by the Chain Protocol: its goals, use cases, threat models, and areas for future improvement. Federated consensus is a mechanism ensuring that all participants in a network agree on a single transaction log. This prevents different versions of the ledger being shown to different participants thus preventing double-spending of assets as well preventing history from being edited. While the blockchain validation rules specify whether a given blockchain is valid, the consensus protocol makes sure there is only one valid blockchain on a given network. This consensus protocol is designed to be practically useful under a certain set of requirements and assumptions commonly encountered in permissioned blockchain networks. The Chain Protocol is capable of supporting alternative consensus protocols. For a detailed description of the federated consensus protocol, see the formal specification . The Chain Protocol blockchain validation rules are intentionally agnostic as to what kind of consensus protocol is enforced. Additionally, they do not play a role in the process by which consensus is reached. Instead, blockchains provide a way for network participants to evaluate whether consensus has been reached: namely, consensus programs. The consensus program specifies a set of conditions that must be satisfied for a block to be accepted. The separation of consensus logic from blockchain validation rules, together with flexibility of consensus programs, allows networks to adopt of arbitrary consensus protocols, even including ones based on proof-of-work and proof-of-stake. The consensus program for each block is specified in the header of the previous block. When the block is validated by a network participant Continue reading >>

Consensus - Blockchain

Consensus - Blockchain

New transactions are broadcast to all nodes. Each node collects new transactions into a block. Each node works on finding a difficult proof-of-work for its block. When a node finds a proof-of-work, it broadcasts the block to all nodes. Nodes accept the block only if all transactions in it are valid and not already spent. Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash. Nodes always consider the longest chain to be the correct one and will keep working on extending it. Cryptocurrencies such as Bitcoin enable users to submit payment transactions without going through a centralized trusted organization. Bitcoin relies on proof-of-work mining to secure consensus which is problematic because mining requires a massive expenditure of energy, confirmation of transactions is slow, and security is difficult to quantify. There are proposals to develop new consensus algorithms, such as Proof of Stake consensus and Byzantine fault tolerance consensus. Consensus without Mining - Proof of Stake In the Proof of Stake model used by, network security is governed by peers having a stake in the network. The incentives provided by this algorithm do not promote centralization in the same way that Proof of Work algorithms do. The network has will be highly decentralized because a large number of unique accounts are contributing blocks to the network by voting, and block creation reward is shared among the participant in proportion to their stake. In a nothing at stake attack, forgers attempt to build blocks on top of every fork they see because doing so costs them almost nothing, and because ignoring any fork may mean losing out on the block rewards that would be earned if that fork were Continue reading >>

Brief Overview Of Blockchain Consensus Models

Brief Overview Of Blockchain Consensus Models

Brief Overview of Blockchain Consensus Models Posted by Navin Purohit | Last Updated: 26-Sep-17 In this digital world, public blockchain plays a vital role. Blockchains are the shared ledger which maintains and grows list of data records which are decentralized and the information stored in blockchains impossible to tamper. Every block in blockchain have piece of information and to add this block into block of chains that is blockchain, we need some functional ,efficient and secure consensus algorithms. Today we are going to discuss various consensus protocols used in Blockchains:- In Proof of Work, miners have to compete with each other to add the block in the blockchain by solving the extremely difficult puzzle. It's kind of race who solves first, win the race. In Bitcoin (using PoW consensus Model), a reward will be given to the winner of a race in terms of 12.5 BTC along with small transaction fees. The winning amount reduces yearly basis in bitcoins as there is a limited number of coins available in bitcoin network.The requirement of enormous computational energy lost electricity for verification of single block. It's a trustless consensus algorithm so now there is need of faster and more-energy-efficient algorithm. In Proof of Stake (PoS), a chance of getting a reward and add the new block into a system is based on some random way and depend on its wealth or stake. Here new blocks created by PoS are forged or minted not mined as we see in PoW. It solves the energy problem and much faster than PoW models but here the issue is with basic model structure. As rich having, more stake is always getting more reward compare to others.Peercoin was the first PoS implemented coin. After that blackcoin, NXT used PoS. But now ethereum also shifted to PoS from PoW with little Continue reading >>

Listen To Our New Energy Blockchain Podcast Segment, Consensus

Listen To Our New Energy Blockchain Podcast Segment, Consensus

Blockchain is coming to the energy industry in a big way. We're at the beginning of a fierce hype cycle, when new startups are emerging weekly to tout their initial coin offerings and tokenization platforms for energy trading. Utility executives are grappling with yet another distributed technology that proponents say will demolish the traditional power delivery business. Still having a hard time understanding why all this matters? Getting lost in the maze of new terminology? We've got you covered. On this week's Interchange podcast, we're starting a new segment called Consensus. We'll bring a blockchain-related topic that we dont understand -- a term, a business model, or an application -- and present it to GTMs resident blockchain enthusiast, Scott Clavenna, to see if he can help us out. Hopefully we'll reach consensus. In this week's segment, we're bringing two questions to Scott: How does WePower's tokenized energy trading work? And what are the different variations of cryptocurrency mining? If you need a blockchain 101 course, try listening to our earlier Interchange episode on the subject. This podcast is brought to you byFiveworx, a turnkey customer engagement platform for utilities. Find out more about howFiveworxcan help your customer engagement program succeed -- and get you beyond the meter. Continue reading >>

Proof-of-stake - Wikipedia

Proof-of-stake - Wikipedia

This article may rely excessively on sources too closely associated with the subject, potentially preventing the article from being verifiable and neutral . Please help improve it by replacing them with more appropriate citations to reliable, independent, third-party sources . ( Learn how and when to remove this template message ) Proof-of-stake (PoS) is a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus . In PoS-based cryptocurrencies the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e. the stake). In contrast, the algorithm of proof-of-work (PoW) based cryptocurrencies (such as bitcoin ) rewards participants who solve complicated cryptographical puzzles in order to validate transactions and create new blocks (i.e. mining ). Proof-of-stake must have a way of defining the next valid block in any blockchain. Selection by account balance would result in (undesirable) centralization, as the single richest member would have a permanent advantage. Instead, several different methods of selection have been devised. Nxt and BlackCoin use randomization to predict the following generator, by using a formula that looks for the lowest hash value in combination with the size of the stake. [1] [2] [3] Since the stakes are public, each node can predict - with reasonable accuracy - which account will next win the right to forge a block. Peercoin 's proof-of-stake system combines randomization with the concept of "coin age," a number derived from the product of the number of coins times the number of days the coins have been held. Coins that have been unspent for at least 30 days begin competing for the next block. Older and larger sets of coins have a greater probability of sign Continue reading >>

A Hitchhikers Guide To Consensus Algorithms

A Hitchhikers Guide To Consensus Algorithms

A Hitchhikers Guide to Consensus Algorithms A quick classification of cryptocurrency consensus types Dont Panic. Behind every great cryptocurrency, theres a great consensus algorithm. No consensus algorithm is perfect, but they each have their strengths. In the world of crypto, consensus algorithms exist to prevent double spending. Heres a quick rundown on some of the most popular consensus algorithms to date, from Blockchains to DAGs and everything in-between. Pull a Rihanna and work work work workwork Popular implementations: Bitcoin , Ethereum , Litecoin , Dogecoin , (Most of them) Cons: Slow throughput; killing the planet Proof of Work was the first blockchain consensus algorithm. Devised by Satoshi Nakamoto for use in the Bitcoin blockchain , we have PoW to thank for the massive mining operations and power consumption we see around the world. We know it works (which is a lot more that we can say for many other consensus algorithms), but at this stage in the game its starting to be considered a legacy technology. Even Ethereum is migrating away from PoW for more energy and economically efficient PoS. With so many new alternatives, its hard to see why a new blockchain would use PoW. In PoW, miners solve hard, useless problems to create blocks. PoW runs on a system of the longest chain wins. So assuming most miners are working on the same chain, that one will grow fastest will be the longest and most trustworthy. Hence Bitcoin is safe as long as more than 50% of the work being put in by miners is honest. Proof-of-Stake (PoS) New kid on the block(chain) Pros: Attacks more expensive; More decentralized; Energy efficient In PoS, the blocks arent created by miners doing work, but by minters staking their tokens to bet on which blocks are valid. In the case of a fork, min Continue reading >>

Beyond Proof Of Work Blockchain Consensus Models

Beyond Proof Of Work Blockchain Consensus Models

Framework for Blockchain-based business integration. Telegram: Beyond Proof of Work Blockchain Consensus Models Blockchains are distributed systems that share a common state the network has to agree on the content of the distributed ledger. Therefore, a consensus model is needed in each blockchain. It ensures that the next block in the chain is the one and only version of the truth. Using a consensus mechanism allows the blockchain to avoid a central authority that keeps track of all accounts. In this post we want to take a look at the different consensus models being used by different blockchains and how they differ. A blockchain is only as secure and robust as its consensus model. There are some key features consensus models have to deliver to be usable in blockchain implementations: - Consistency: A consensus mechanism is safe if all nodes produce the same valid output - Aliveness: A consensus mechanism assures aliveness if all nodes participating eventually produce a result. -Fault Tolerance: A consensus mechanism delivers fault tolerance if it can recover from failure of a node. The proof of work model lets all miners in the blockchain compete to generate the next block of the chain. This is most often done by solving extremely difficult cryptographic puzzles. The one node that solves the puzzle first may propose the next block which is checked for validity and the correct solution of the puzzle by the other nodes. As a reward for solving that puzzle and using a lot of computational/electrical energy, the miner receives a reward. Bitcoin as the most prominent blockchain using the PoW mechanism, repays 12.5 BTC for every added block to the succeding miner at the moment. These bitcoins are newly mined during that process. Proof of Work is often criticized for using Continue reading >>

Review Of Blockchain Consensus Mechanisms

Review Of Blockchain Consensus Mechanisms

PR at @Wavesplatform #blockchain #cryptocurrency #fintech $WAVES Review of blockchain consensus mechanisms Cryptocurrencies use distributed ledgers or blockchains to record information primarily about the balance of every address for value transfer platforms (like bitcoin and most cryptocurrencies), though the approach can be extended to any kind of information. Key to the operation of the blockchain is that the network should collectively agree on the contents of the ledger: instead of authority for keeping accounts being centralised in one entity, like a bank, it is shared amongst everyone. This requires that the network maintains consensus around the information recorded on the blockchain. How this consensus is achieved impacts the security and economic parameters of the protocol. Here are five examples of how its done. Proof of work is the first distributed consensus mechanism, pioneered by bitcoins pseudonymous creator, Satoshi Nakamoto. Many cryptocurrencies followed suit, including Ethereum. In PoW, all the computers in the network that are tasked with maintaining the security of the blockchain known as Miners in bitcoin work to solve a puzzle consisting of a mathematical function called a hash. This task is straightforward (for a computer) but extremely repetitive, and therefore computationally expensive. Computers compete to find a hash with specific properties. The computer that finds the answer first the proof that they have done the necessary work is allowed to add a new block of transactions to the blockchain. They are rewarded with a tranche of newly-minted bitcoins (currently 12.5 BTC per block, or roughly every 10 minutes), plus all of the small transaction fees users have paid to send coins. PoW operates on the principle that it is expensive to add a t Continue reading >>

Consensus Mechanisms Used In Blockchain

Consensus Mechanisms Used In Blockchain

This is a write up on consensus mechanisms on Blockchain and how they compare. I try to dive into the mechanics, features and limitations of each consensus mechanisms. The purpose of a consensus algorithm is to allow for the secure updating of a state according to some specific state transition rules, where the right to perform the state transitions is distributed among the economic set (Buterin, 2014). The economic set can be users which are given the right to collectively perform transitions through an algorithm (Buterin, 2014). The economic set in question should be securely decentralized. This refers to no single actor or a set of colluding actors can take up majority of the set. Proof-of-Work is currently the most common consensus mechanism for blockchain technologies. The miner builds a candidate block filled with transactions. Then the miner calculates the hash of his block header and see if it fits the current target. If the hash does not fit, it will modify the nonce, usually through adding one to it, and then try again. The current difficulty in bitcoin network requires miners to try quadrillions of times before finding a nonce that fits. It is virtually impossible to find two different inputs that produce the same result after cryptographic hashing. Recall, that the output of the cryptographic hash function changes drastically when there is a minor change to the input. See Diagram below. This is a safety feature to ensure one way cryptography. A nonce is an arbitrary number that may only be used once. Blockchain uses a nonce to tune the difficulty of solving the hashing function. Diagram below is used to show nonce attached to input text I am Satoshi Nakamoto and the resulting SHA-256 output. Each phrase produces a completely different output. The number at Continue reading >>

A (short) Guide To Blockchain Consensus Protocols - Coindesk

A (short) Guide To Blockchain Consensus Protocols - Coindesk

A (Short) Guide to Blockchain Consensus Protocols We hear plenty of talk of how public blockchains are going to change the world, but to function on a global scale, a shared public ledger needs a functional, efficient and secure consensus algorithm. A consensus algorithm, like bitcoin's proof of work (the one we hear about most often), does two things: it ensures that the next block in a blockchain is the one and only version of the truth, and it keeps powerful adversaries from derailing the system and successfully forking the chain. In proof of work, miners compete to add the next block (a set of transactions) in the chain by racing to solve a extremely difficult cryptographic puzzle. The first to solve the puzzle, wins the lottery. As a reward for his or her efforts, the miner receives 12.5 newly minted bitcoins and a small transaction fee. Yet, although a masterpiece in its own right, bitcoin's proof of work isn't quite perfect. Common criticisms include that it requires enormous amounts of computational energy , that it does not scale well (transaction confirmation takes about 10-60 minutes) and that the majority of mining is centralized in areas of the world where electricity is cheap. Bitcoin creator Satoshi Nakamoto woke us up to the potential of the blockchain, but that doesn't mean we can't keep searching for faster, less centralized and more energy-efficient consensus algorithms to carry us into the future. While not a comprehensive list, the following are a few of the alternative approaches being kicked around out there. The most common alternative to proof of work is proof of stake. In this type of consensus algorithm, instead of investing in expensive computer equipment in a race to mine blocks, a 'validator' invests in the coins of the system. Note the te Continue reading >>

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