proof of work, proof of stake, proof of authority.
A blockchain is a decentralized system with no central authority, unlike a banking system where transactions are validated through the banks and other financial institutions, on the blockchain transactions must be validated by consensus. How does this happen?.
Consensus is simply what it means an agreement to accept and that’s what it is. All blocks agree to allow that record because it is verifiable based on a particular verification or validation system the blockchain follows known as a consensus mechanism.
There are various types of Consensus mechanisms, but we would be talking about three today; proof of work, proof of stake, and proof of authority.
Proof of Work:
This mechanism achieves transaction validation through a process known as mining. The mining process involves using computing resources to solve a complex mathematical problem that allows the miner to verify a transaction. The first miners to solve the problem get it added to the block and get a reward. Miners are usually rewarded with some native token like ETH, BTC, etc. If it is in line with other blocks, then the transaction gets registered by all blocks on the chain. If not, the block is considered invalid and excluded from the chain. Blocks are easily able to detect because of cryptographic hashing. Here is a simple explanation. However, there is a complex mathematical process behind the entire system.
Proof of Stake (“Put your money where your mouth is”):
The proof of stake mechanism allows the account to be randomly chosen based on the amount of stake they commit to the network. In other words, the higher you stake, the higher the chance you’ll be selected to validate the transaction and add it to the blockchain. If this is done successfully the validators are rewarded, if anything fishy is detected all the amount stake is lost. This makes fraud a risky venture on the proof of stake system. Blockchains like EOS blockchain use this mechanism. Ethereum is equally expected to move the proof of stake mechanism soon.
Proof of authority:
Proof of authority is similar to what we have in existence. Here only approved parties are selected to validate transactions based on their reputation. In other words, they are given authority. Ethereum’s Kovan testnet and IBM’s hyper ledger fabric use this mechanism for consensus.
Most blockchains use a single mechanism for transaction validation, However, some chains use more than one system to validate transactions. The various modes of consensus make it difficult for fraud to occur through the validation process.
Thanks you for reading, I hope you learnt a little more about the blockchain today. Cheers!.
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