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What Is Blockchain Consensus

Consensus Mechanisms Of The Blockchain Codecentric Ag Blog

Consensus Mechanisms Of The Blockchain Codecentric Ag Blog

Welcome to the first article of the blockcentric column. We created it for blogging about Blockchain and all related topics. It will contain exciting articles about technology, projects, organisation and business concerns. They will contain knowledge and findings from our 20% time work but also news from the area. We are looking forward to your feedback on the column and exciting discussions about your use cases. A blockchain creates trust, traceability, and immutability through a peer-to-peer network. All transactions in the network, such as payments or event tracking in a supply chain, are confirmed by participants in the network. Thus, no central authority alone controls the validity of these events. These acknowledgments given by the participants lead to a consensus in the network, with which the data on the blockchain is continually persisted. So the majority of the participants decide whether a transaction is valid, instead of a single player. To create and implement a consensus, there are several mechanisms that I would like to explain and discuss in the following. Each Blockchain needs to choose one mechanism that handles the agreement of all participants onto a truth about their data. It could be imagined as a consistent way to get all politicians of a parliament to agree on one opinion. As politicians probably need to discuss about this, all participants of a blockchain network do this by communicating with each other over the network. The communication protocols are thereby implemented in the software that is executed on all involved devices. What is communicated here, however, is not a political opinion but the data base of the blockchain, such as the transaction history of a currency like Bitcoin . Currently there are mainly two of those consensus mechanis Continue reading >>

Intro To Blockchain: Consensus Algorithms - Part 1 | Xoken

Intro To Blockchain: Consensus Algorithms - Part 1 | Xoken

This question can be best answered by taking a look at the history of government. A lot of the same principles that apply to democracy, also apply to blockchains. Democracy was founded on the basis that power belongs to the people, and blockchains achieve a similar decentralization. The pillars of democracy that many of us experience every day, has not yet transferred over to technology. DLT stands for Distributed Ledger Technology and is one of the largest technological advancements of our time. A distributed ledger is just a database that is spread over multiple sites. This allows for more consistent uptime and the elimination for a centralized power. A blockchain is a type of distributed ledger. The word blockchain is pretty self-explanatory. In the most literal sense, blocks are added to a chain. The addition of every following block, makes it harder to alter the original block (in order to get back to the original, every block after it would need to be removed). Each block is composed of a group of transactions that is bundled together by a node. The way that the node does this, is by utilizing a consensus algorithm, which will be explained in the next section. After a node solves the block, it is broadcasted on the network to the other nodes. If the other nodes verify that the solution provided is correct, the block is accepted onto the chain. Perhaps the single most defining and important characteristic of a blockchain is the chosen consensus algorithm. This algorithm is what verifies that a block that is to be added to the blockchain is the real version. Without a consensus algorithm, anyone could potentially add information to the blockchain, which would derail the legitimacy of the entire system. There are two main types of consensus algorithms: 1. Proof-of-w Continue reading >>

Consensus Algorithms Inblockchain

Consensus Algorithms Inblockchain

Posted on August 13, 2017 by Prabhat Kashyap When we talk about the blockchain, the first thing that came up in our mind is the security and the security because of the blockchain consensus algorithm. Those who know about the blockchain know that we keep the ledger transactions synchronized across the network to ensure that ledgers only update when the appropriate participants approve transactions and that when ledgers do update, they update with the same transactions in the same order is called consensus. Here we will discuss the three different consensus algorithms. Imagine that several divisions of the Byzantine army are camped outside an enemy city, each division commanded by its own general. The generals can communicate with one another only by messenger. After observing the enemy, they must decide upon a common plan of action. However, some of the generals may be traitors, trying to prevent the loyal generals from reaching an agreement. The generals must decide on when to attack the city, but they need a strong majority of their army to attack at the same time. The generals must have an algorithm to guarantee that (a) all loyal generals decide upon the same plan of action, and (b) a small number of traitors cannot cause the loyal generals to adopt a bad plan. The loyal generals will all do what the algorithm says they should, but the traitors may do anything they wish. The algorithm must guarantee condition (a) regardless of what the traitors do. The loyal generals should not only reach an agreement but should agree upon a reasonable plan. Above story represents the Byzantine Generals Problem. There are many solutions for this problem, but we will talk about Practical Byzantine fault tolerance (PBFT). In 1999, Miguel Castro and Barbara Liskov introduced the Pract Continue reading >>

Ethereum - Consensys

Ethereum - Consensys

Ethereum is how the Internet was supposed to work. There are four core technological building blocks that are coordinated to enable the Ethereum decentralized application platform to operate: 1) Cryptographic Tokens and Addresses: a mathematically secure unique voucher system that can act as numeraire and be used pay for goods, services or assets, and can also be used to represent a mathematically secure, pseudonymous identity; 2) Peer-to-peer Networking: individual users connect their computers together forming a network to exchange data without a central server (both Bitcoin and Ethereum run on P2P networks); 3) Consensus Formation Algorithm: this algorithm permits users of the blockchain to reach consensus about the current state of the blockchain (the Bitcoin blockchain reaches consesus on a global state change every 10 minutes on average whereas the Ethereum blockchain reaches consensus approximately every 15 seconds). 4) Turing Complete Virtual Machine: a virtual machine is a computer that exists as software, and can be run at a layer of abstraction above the underlying hardware; Turing complete means that this software computer can run any computer program one defines and is powerful enough to implement any program defined in any similarly computationally complete system (as opposed to Bitcoin, which has a virtual machine but can only run a much simpler class of programs); These 4 pillars of decentralized application technology are designed to enable smart contracts. Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of some sort of agreement (e.g. a legal contract emulating the logic of contractual clauses or a financial contract specifying responsibilities of the counterparts and automated flows of value). 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 >>

How Do The Various Blockchain Consensus Mechanisms Work, In Plain English?

How Do The Various Blockchain Consensus Mechanisms Work, In Plain English?

Imagine youre in a large room filled with people trying to send each other magical coins. These coins have the property that they can be duplicatedI can send one coin to Alice and send a duplicate coin to Bob. This is called double-spending, and it doesnt make for a very effective form of currency. One way we could prevent double-spending is to have all transactions go through a single person in the center of the room. She keeps a ledger of all transactions that have been made, and so she can detect and prevent double-spending. This is similar to how our current centralized banking system works. Cryptocurrencies, such as Bitcoin, answer the question of: How can we do this in a decentralized manner so that one entity doesnt have all the power? Suppose everyone in this large room keeps their own ledger of transactions, which is called a blockchain. When I send a coin to Alice, I yell out Hey everybody, Ive sent a coin to Alice! Of course, this would be quite clamorous with a large number of people, so not everybody would hear me. Those who do hear me will keep a record my transaction to Alice in their blockchain, and will pass this information along to their neighbors. Sooner or later, most, if not all, of the room will have heard about and recorded my transaction to Alice. Youve probably realized that this system sounds like a complete mess, and youd be right! A person on one side of the room very likely has a different looking blockchain than some other person on the other side of the room, and we havent taken care of the double-spending problem yet. This is where consensus comes in. While all of this maniacal shouting is happening, every person in the room is also individually playing some completely nonsensical game of chance, say, roulette. If I win, Im rewarded han 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 >>

Explaining Blockchainhow Proof Of Work Enables Trustless Consensus

Explaining Blockchainhow Proof Of Work Enables Trustless Consensus

Software engineer with interests in social innovation, psychology, philosophy, ethics and spirituality. Co-founder @ coinfund.io and Consensus Labs, Inc. Explaining blockchain how proof of work enables trustless consensus Blockchain technology, of which Bitcoin is an example, can be quite hard to understand. Mainly this is because core concepts tend to get lost among the complexity of non-essential details. This article tries to fill the gap between general audience literature that is entirely uninformative to computer professionals and highly specialized literature that is informative, but often overwhelming. It is written for people with some technology background but without in-depth familiarity with this particular field. The subject of this article is technology of distributed trustless consensus, for this is the one area in which blockchain systems, like Bitcoin, are indeed a major breakthrough. When it comes to other goals, such as distributed data storage, anonymity, transaction verifiability, data obfuscation, shared ledgers, micropayments, high throughput, digital contracts, and so on, cryptographic blockchain systems are, essentially, incidental. Solutions to these problems are well known outside of the blockchain space and, consequently, I will not focus on them here. The main innovation that Satoshi Nakamoto introduced in his article is using so-called proof of work (POW) to create distributed trustless consensus and solve the double-spend problem. POW is not a new idea, but the way Satoshi combined this and other existing concepts cryptographic signatures, merkle chains, and P2P networks into a viable distributed consensus system, of which cryptocurrency is the first and basic application, was quite innovative. Proof of work is a requirement that expensiv 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 >>

Blockchain Consensus Algorithms Proof Ofanything?

Blockchain Consensus Algorithms Proof Ofanything?

Blockchain Consensus Algorithms Proof ofAnything? Blockchains have been proven over the last years to be stable distributed ledger technologies. Stable refers to the fact that they can recover from attacks and/or bugs without compromising their assets. They are most commonly known for enabling transaction with virtual cryptocurrencies not issued by a central authority. Popular examples are Bitcoin and Ethereum . However, both have been forked to create also alternative coins (Altcoins) having different features. For instance, Namecoin , the first fork of Bitcoin, is a cryptocurrency providing at the same time distributed domain name and identity without relying on a central authority. Thus, it is more resilient to censorship or potentially not democratically elected central authorities governing it. Of course at the same time this new technology as all new technologies have some risk because they need to be properly understood by their users. Initial Coin Offers (ICO) that fork from popular blockchains (or not even do this) may be part of frauds or scams. Hence, it is important to understand their key mechanisms and this blog post describes one of them: Establishing consensus of transactions happening on a blockchain. Without secure consensus it is possible to steal value (coins) or manipulate entries in the blockchain. The consensus is usually decided by a participant that can provide a proof of something. This something differ in the different consensus mechanisms. One should not confuse blockchain consensus with consensus in distributed systems. Consensus in distributed systems is about agreeing on a certain data value during computation. The idea is to reach a common state among several copies of data despite of failure, network partitioning or even manipulation by Continue reading >>

Basic Primer: Blockchain Consensus Protocol

Basic Primer: Blockchain Consensus Protocol

Basic Primer: Blockchain Consensus Protocol Basic Primer: Blockchain Consensus Protocol guide. A blockchain is a decentralized peer-to-peer system with no central authority figure. While this creates a system that is devoid of corruption from a single source, it still creates a major problem. Think of a normal centralized organization. All the decisions are taken by the leader or a board of decision makers. This isnt possible in a blockchain because a blockchain has no leader. For the blockchain to make decisions, they need to come to a consensus using consensus mechanisms. So, how do these consensus mechanisms work and why did we need them? What are some of the consensus mechanisms used in cryptocurrencies? We will answer these questions in this guide.Basic Primer: Blockchain Consensus Protocol This is how Wikipedia defines consensus decision-making: Consensus decision-making is a group decision-making process in which group members develop, and agree to support a decision in the best interest of the whole. Consensus may be defined professionally as an acceptable resolution, one that can be supported, even if not the favourite of each individual. Consensus is defined by Merriam-Webster as, first, general agreement, and second, group solidarity of belief or sentiment. In simpler terms, consensus is a dynamic way of reaching agreement in a group. While voting just settles for a majority rule without any thought for the feelings and well-being of the minority, a consensus on the other hand makes sure that an agreement is reached which could benefit the entire group as a whole. From a more idealistic point-of-view, Consensus can be used by a group of people scattered around the world to create a more equal and fair society. A method by which consensus decision-making is a Continue reading >>

Blockchain Consensus Algorithm: Pow, Pos, And Beyond

Blockchain Consensus Algorithm: Pow, Pos, And Beyond

Blockchain Consensus Algorithm: PoW, PoS, and Beyond One of the most critical aspects to understand blockchain its speed, applications, and potential is consensus algorithms. It determines everything from network security, confirmation speed, to environmental friendliness. As crucial as it is, few comprehend how such a dynamic concept works in practice; and among the most misunderstood aspects include just how new blocks of information are securely added to the ledger, consideringnocentralized authority is engaged to maintain the integrity of the network. As a recap from an earlier post , blockchain provides a way for transactions to be ordered and verified in a distributed ledger and ultimately provides a record of truth over a period of time. Without a central intermediary, the network of participating users that make up this system need to agree on the validity of whats being added to the ledger, using a set ofpre-definedrules. Aconsensusneeds tobe reached for the majority of the nodes in the network. But just how effective it is to implement such a consensus remains a work in progress till this very day. The problem of ensuring reliability in decentralized systems was first formalized in the scholarly paper The Byzantine Generals Problem , published back in 1982. In the illustration created by the authors, a Byzantine army is attacking a city and has it completely encircled. To proceed, the generals who are dispersed around the citys periphery must agree on a battle plan; but while some generals want to attack further, others want to retreat. And to complicate matters, the generals are so far apart from each other that messengers are required to deliver communications between them, while one or more generals may also be a traitor intending to sabotage the situation Continue reading >>

Consensus - What's The Difference Between Proof Of Stake And Proof Of Work? - Ethereum Stack Exchange

Consensus - What's The Difference Between Proof Of Stake And Proof Of Work? - Ethereum Stack Exchange

What's the difference between proof of stake and proof of work? The Ethereum frontier network currently uses a proof of work (PoW) consensus algorithm, while a future version of the network plans to utilise a proof of stake (PoS) algorithm instead. What's the difference between these two types of algorithm? This is a sort of test question, since it could fit either on this stack exchange or the bitcoin stack exchange. I'm curious to see whether we consider this on- or off-topic. Jeff Coleman Jan 20 '16 at 21:57 I think it is definitely on topic, the POS transition is a major network feature Tjaden Hess Jan 21 '16 at 2:16 Let us start by what they have in common: they are both algorithms for reaching consensus on the blockchain. Without going into too much details, we need consensus because anyone can create a block; while we only want an unique chain, so we want a way to decide which block we should trust. Proof of work has the nice property that you can use Bayes' Theorem and the laws of Thermodynamics to prove that a given block has indeed required a certain amount of work to be mined. That way, users can simply pick the longest valid chain with the highest amount of work as the correct chain. But this implies that Proof of Work is extremely inefficient in term of energy, and therefore also very expensive; which incentivize miners to centralize the hashing power -- obviously not desirable for a network whose goal is to minimize the need to trust third parties. Proof of Stake isn't about mining, it's about validating. In effect blocks still need to be created by someone, and who gets to create the next block depends on the specific Proof of Stake algorithm, but the selection process must have some kind of randomness, or at least distribute voting shares properly (othe Continue reading >>

Drops - Blockchain Consensus Protocols In The Wild (keynote Talk)

Drops - Blockchain Consensus Protocols In The Wild (keynote Talk)

Blockchain Consensus Protocols in the Wild (Keynote Talk) A blockchain is a distributed ledger for recording transactions, maintained by many nodes without central authority through a distributed cryptographic protocol. All nodes validate the information to be appended to the blockchain, and a consensus protocol ensures that the nodes agree on a unique order in which entries are appended. Consensus protocols for tolerating Byzantine faults have received renewed attention because they also address blockchain systems. This work discusses the process of assessing and gaining confidence in the resilience of a consensus protocols exposed to faults and adversarial nodes. We advocate to follow the established practice in cryptography and computer security, relying on public reviews, detailed models, and formal proofs; the designers of several practical systems appear to be unaware of this. Moreover, we review the consensus protocols in some prominent permissioned blockchain platforms with respect to their fault models and resilience against attacks. @InProceedings{cachin_et_al:LIPIcs:2017:8016, author = {Christian Cachin and Marko Vukolic}, title = {{Blockchain Consensus Protocols in the Wild (Keynote Talk)}}, booktitle = {31st International Symposium on Distributed Computing (DISC 2017)}, pages = {1:1--1:16}, series = {Leibniz International Proceedings in Informatics (LIPIcs)}, ISBN = {978-3-95977-053-8}, ISSN = {1868-8969}, year = {2017}, volume = {91}, editor = {Andr{\'e}a W. Richa}, publisher = {Schloss Dagstuhl--Leibniz-Zentrum fuer Informatik}, address = {Dagstuhl, Germany}, URL = {URN = {urn:nbn:de:0030-drops-80160}, doi = {10.4230/LIPIcs.DISC.2017.1}, annote = {Keywords: Permissioned blockchains, consensus, Byzantine fault-tolerance, snake oil, protocol analysis}} 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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