The key condition is that the network must collectively coordinate the contents of the register: it is distributed among all participants in the chain instead of transferring centralized accounts to one entity-for example, a bank.
This network needs to maintain a consensus around the information recorded in the blockroom. The way to achieve this consensus affects the security and economic parameters of the protocol. Here are five examples of its achievement.
1. Proof of Work, PoW
Confirmation of the performance of work is the first distributed mechanism for reaching consensus, created by the creator Bitcoin, known under the pseudonym of Satoshi Nakamoto. His example was followed by many crypto-currencies, including Ethereum.
In the case of PoW, all the computers on the network that are tasked with maintaining the security of the block (in the case of Bitcoin they are called miners) are working on calculating a mathematical function called a hash. This is a fairly simple task (for a computer), but it is constantly repetitive and therefore expensive in terms of calculations. Computers compete for searching a hash with special properties. The computer that calculates it first will receive confirmation that it has completed the necessary work and can add a new transaction block to the block. As a reward, he will receive a tranche of freshly produced bitcoins (currently 12.5 BTC per block or approximately every 10 minutes), plus all small transaction fees that users paid for sending coins.
PoW works on The following principle: adding a tranche of new transactions to the block account is expensive, but to check whether transactions are valid is very easy, thanks to the transparency of the register. Miners collectively confirm the reality of the whole blockbuster, and transactions are not considered fully "confirmed" until several new blocks are added to them. If an attacker tries to use coins illegally, his transactions will be ignored by the rest of the network. The only way for an attacker to commit such fraud is to have a huge amount of processing power, which allows him to scramble the block behind the block and repeatedly the first of the whole network to receive confirmation of the performance of the work. This method is called "51% attack", because for its implementation it is necessary to have more than half of the total network hash. The reality is that no miner can have such a share of the hash. In other words, the attempt of such fraud 1) is extremely expensive (since it requires the cost of equipment and electricity, and also carries with it the opportunity costs caused by the lack of work in the real version of the detachment and getting paid for it) and 2) extremely unlikely. Consequently, it is better (that is, more profitable) for ministers to remain honest.
2. Proof of Stake
PoW is an expensive and energy-intensive method due to the required computing power. A whole industry has grown up around the creation of special equipment intended exclusively for mining. Confirmation of a share (PoS) is an alternative method that does not require special equipment and has become very popular in recent years. In the case of PoW, the probability that the participant will add the next block of transactions to the chain is determined by the hash level. In the case of PoS, this probability is determined by the number of coins of the participant. In other words, each network node is associated with a specific address, and the more coins belong to this address, the more likely it is that they block (or "stop" in this case) the next block. It's like a lottery: the winner is determined by chance, but the more coins (lottery tickets) he has, the more chances he has. An attacker who wants to commit a fraudulent transaction will need to own more than 50% of the coins for reliable processing of the required transactions; The purchase of so many coins will provoke a rise in prices for them and make such an attempt prohibitively expensive.
The PoS system was first developed by Nxt. Since it is not as energy-intensive as PoW, the cost of obtaining coins does not require such a reward as in the case of Bitcoin. Thus, PoS systems are well suited for platforms with a fixed number of coins and the absence of inflation from the created blocks. Remuneration of participants consists only of a commission for conducting transactions. This approach is used by most platforms financed by crowdsdale, where tokens are distributed on the basis of investments, and the increase in the number of coins will not be liked by investors, as this will "dilute" their share.
Currently, confirmation of a share is good A well-established mechanism for reaching consensus, but it is not often used in its original form. Certain advantages are offered by two of its varieties, LPoS and DPoS.
3. Leased Proof of Stake (LPoS)
In the case of classical PoS, participants in a network with a small balance are unlikely to be able to add blocks to the chain – just as small low-level miners are unlikely to be able to create a block in the Bitcoin chain. It may take many years before a small participant is lucky enough to create a block. This means that many network members with a small balance do not have nodes and allow a limited number of larger participants to manage the network. As network security increases with the number of participants, it is important to encourage these small participants to participate in it.
The LPoS mechanism allows participants to do this by leasing their funds to large nodes. The leased funds remain under the full control of their owner and can be transferred or spent at any time (after which the lease ends). Leased coins increase the "weight" of the network node, increasing its chances of adding a block of transactions to the block. Any nodes received are remunerated by the landlords. This approach is applied by Waves.
4. Delegated Proof of Stake (DPoS)
BitShares and a number of other platforms use a slightly different approach. With DPoS, coin owners use their means to select a list of nodes that will be able to create blocks of new transactions and add them to the block system. This involves all coin holders in the network, although they may not receive direct remuneration, as in the case of LPoS. Coin holders can also vote for changes in network parameters, which increases their influence on the network and the share in it.
5. Proof of Importance (PoI)
The last kind of these mechanisms for reaching consensus is PoI. NEM became the first crypto currency platform for implementing this method. In the case of PoI, it is important not only the number of coins. The consensus building system of NEM is based on the idea that it is worthwhile rewarding for productive network activity, and not just for owning coins. The probability of creating a block depends on a number of factors, including available funds, reputation (determined by a separate special system) and the number of incoming and outgoing transactions from this address.
There are many varieties of these basic approaches, and some platforms use a combination of PoW and PoS – the first is often used to distribute coins, and then the platform goes to the second method to maintain the network. Another approach is the use of the main nodes in conjunction with the mining of PoW, as in the case of DASH and Crown.
In all cases, the goal of the consensus approach is to ensure the security of the network, mainly through economic means: an attack on the network must be too expensive, and its Protection – more profitable.