The consensus algorithm is an important concept when we discuss Blockchain. In my previous blog, What is Blockchain technology: An Overview, we had an overview of Blockchain technology and its different components. Though Bitcoin is the most popular type of Blockchain, there are different types of Blockchain in the market, and each of them follows a different Blockchain protocol or consensus algorithm. The consensus in the blockchain is a vital concept which basically supports consensus algorithms on their own. In this article, we will go through the types of Blockchain and what is consensus in blockchain? And why do we need them?

Why do we need different types of Blockchain?

Before we proceed to know further the different types of Blockchain, we must understand why we need different Blockchains instead of a single one.

First of all, not all business needs to serve the same goal. Hence, using a single Blockchain type and customizing the solution is more cumbersome than having different types of Blockchains, which are having already a built-in solution. Alongside, we can get the following advantages:

– No dependency on large servers. So cost-effective and less maintenance.

– Using the same Blockchain technology user can get options of rights and access management.

– Eliminates redundant work.

– Even though users remain in different geographical locations, distributed consensus makes it fast.

What are the different types of Blockchain?

There are mainly three types of Blockchains:  

– Public Blockchain

– Private Blockchain

– Consortium or Federated Blockchain

Apart from these, there are more complicated types of Blockchains are there like –

– permissioned Blockchain

– private-permissioned Blockchain 

Related post – What is Blockchain Technology?

1. Public Blockchain

A public Blockchain is the Blockchain of the public. It is a more simple term –for the people, by the people, and of the people’. This type of Blockchain is open and transparent so that anyone can read and modify it. The modification here implies writing and auditing. Interestingly, no one is in charge of such type of Blockchain. Thus, the immediate next question arises how decision making happens in this case? Well, different consensus algorithm blockchain work here for that purpose. We will discuss that in the latter section of this blog.

Example: Bitcoin, Litecoin, etc.

2. Private Blockchain

Private Blockchain is private property and comes under the charge of an individual or an organization. Unlike public Blockchain, not anyone can access private Blockchain. This Blockchain’s central authority provides the mining rights, which is the only medium of achieving the consensus. In other words, a private Blockchain is a centralized concept that is cryptographically secured and cost-effective. However, as anyone can’t make transactions on the chain, it is debatable whether we can call private Blockchain a ‘Blockchain.’

Example: Bankchain

3. Consortium or Federated Blockchain

There is no sole autonomy in this type of Blockchain, like private Blockchain. Instead of one in charge, more than one in charge gets involved in this type of Blockchain. It could be a group of companies or individuals who make decisions for the particular Blockchain network’s best benefit. Furthermore, they can make transactions on the chain. Such a group is known as consortiums or a federation, and the Blockchain is named after it. This Blockchain is much faster and contains more than one single point of failure. Thus the whole ecosystem remains more secured.

Example: r3, EWF

 

What are consensus algorithm blockchain?

Consensus algorithm blockchain is a protocol that makes sure all nodes are synchronized with each other. Furthermore, it decides which transactions are valid and are added to the Blockchain. Consensus algorithms make sure every participant in the Blockchain network uses the same Blockchain. Furthermore, the consensus in blockchain ensures whether the Blockchain is functioning correctly. Besides, it constantly checks the transactions, audits the nodes as whole consensus mechanisms facilitate the decision-making processes. To be more precise – consensus in blockchain objectives of consensus mechanisms are:

Seeking Agreement – As mentioned earlier, the consensus is an agreement between a Blockchain network members. Hence, seeking agreement is the primary objective of a consensus mechanism that brings about most members’ agreement.

Collaboration – The secondary objective of a consensus protocol is the collaboration between the intermediaries who participated in the agreement.

Egalitarianism – It should be called consensus only when votes of individual members of a group should hold equal weight. No one would be considered more critical or get less priority in this regard.

Inclusiveness – The voting process on a Blockchain must be unbiased for all the members and open to as many entrants as possible.

List of Consensus algorithms Used In Blockchain

Various types of consensus algorithms are there in the Blockchain space. Interestingly, some come as the solutions to shortcomings in previous models. Additionally, some consensus algorithms aim to solve niche problems. However, the most commonly used consensus algorithms in Blockchain are:

Proof of Work (PoW)

Proof of Work is the most widely used consensus in the blockchain. The bitcoin creator, Satoshi Nakamoto, developed it. Proof of Work consensus protocols relies on computing hardware to solve complex but superfluous mathematical equations. This way, it finds a hash. The first miner who can solve the hash can produce the next block, which records a transaction set. No doubt, the Proof of Work consensus algorithm unveils the power of the hash function.

Example: Bitcoin

Proof of Stake (PoS)

Proof of Work consensus algorithm raises the growing use of power-intensive equipment, which generates a potentially negative environment. To answer this concern, the Proof of Stake consensus algorithm comes into the picture. It does not depend on computer power. Instead, it relies on the coin numbers that a user stakes. The more coins a user stakes, the higher the likelihood he can process the next block. Here the reward for the miner is the transaction fees. PoS consumes less power than PoW. However, to some extent, it encounters the same problem as PoW.

Example: Cardano, QTUM, Ethereum 

Delegated Proof of Stake (DPoS)

Delegated Proof of Stake relies on the Proof of Stake (PoS) system where a user’s stake determines voting power. However, DPoS adds new blocks to the network with the stake of their coin holdings to select nodes.

Example: Lisk, Steem, BitShares

Directed Acyclic Graph (DAG)

This is the third evolution of Blockchain technology, and, according to graph theory, it is a finite directed graph. Though it does not have directed cycles, DAG allows numerous transactions on multiple chains at a time. This, in turn, unlocks the potential for Blockchain to perform transactions instantly and at minimum cost.

Example: IOTA

Practical Byzantine Fault Tolerance (PBFT)

The PBFT consensus mechanism with having participants confirm messages sent to them by running a computation. This determines it’s a decision about the message’s validity. The party then broadcasts the decision to other nodes, which then process a decision on it. The final decision depends on the decisions returned by the other nodes.

PBFT is a lightweight consensus algorithm, as it depends on the number of nodes as opposes to a high hash rate to reach consensus.

Example: Ripple,Stellar, Hyperledger

Proof of Elapsed Time (PoET)

Proof of Elapsed Time solves the user commission issues caused by Proof of Stake consensus algorithms. This effectively ensures every participant has an equal opportunity to produce a block. This is mostly used in permissioned Blockchains and allows each node to produce blocks for a specified amount of time. After that, it rests for a certain amount of time. At the same time, other nodes add blocks to the network.

Final verdict:

Finally, all of these consensuses in blockchain have the same goal. It is to achieve consensus in a decentralized network. The different approaches of these consensus algorithms vary a lot to reach a common goal.