Blockchain is a chain of many individual blocks connected backwards and forwards through a certain mechanism, forming a chain containing a large amount of transaction data information. However, specific technologies are needed to ensure that the information between blocks is valid and consistent, and to ensure the validity of transactions and the stability of the network. Consensus algorithms are a key part of the solution to this problem, ensuring the integrity and stability of the network. At the same time, to ensure the security of the blockchain network, the consensus process must be resistant to various attacks.
Consensus Mechanisms
Blockchain data, in addition to nodes, requires a specific consensus mechanism to verify the legitimacy of the submitted data, which is a set of protocols, incentives and ideas that enable nodes across the network to agree on the state of blockchain. Common consensus mechanisms include Proof of Work (PoW), Proof of Stake (PoS), Proof of Authority (PoA) and Delegated Proof of Stake (dPoS), as well as consensus mechanisms like Practical Byzantine Fault Tolerance (PBFT) and Nominated Proof of Stake (NPoS).
Proof of Work (PoW)
Proof of Work is one of the most common consensus mechanisms that requires miners to solve complex cryptographic puzzles in order to add blocks to the blockchain. BTC, which currently has the largest market capitalization, is a proof-of-work mechanism that has been in operation for over 13 years and has proven security. However, its high energy consumption drawback is also controversial.
Proof of Stake (PoS)
Proof of Stake is seen as a more efficient and secure alternative. Nodes or users involved in the forging process are required to lock a certain number of tokens into the network, which exist as their equity. The size of the entitlement determines the chance of selecting a node as the next verifier, the larger the entitlement, the greater the chance.
Ethereum, which has the most flourishing ecosystem and application development, officially completed The Merge in September 2022, officially moving from PoW to PoS proof of stake. PoW mining, which consumes computer power, is replaced by pledging ETH as a verifier.
Delegated Proof of Stake (dPoS)
In the PoS consensus mechanism, the task of verifying transactions on the blockchain is randomly delegated to all pledgers. In practice, however, most users do not have the expertise needed for their pledges, or do not have enough budget, resulting in these pledgers not having the opportunity to produce blocks. However, a small number of accounts are rewarded with the power to produce blocks simply because of their high volume of coins.
In the Delegated Proof of Stake (DPoS) new system, users are allowed to vote directly, or delegate their voting rights to another user. That is, users on the DPoS chain who own the chain's currency can vote for the node they want to verify the transaction and trust. And if a Witness acts in a way that is not permitted, the community has the right to revoke their electoral rights and remove the eliminated Witness by electing a new representative. As a result, many consider DPoS to be the most democratic consensus mechanism.
Proof of Authority (PoA)
Proof of Authority is a permission-based consensus mechanism first proposed in 2015 by Gavin Wood, co-founder of Ethereum.PoA adds new blocks to the blockchain through a team of pre-approved verifiers. These verifiers are selected based on their reputation and authority, and PoA is considered secure because the PoA consensus mechanism values identity and reputation, and penalties can be found directly for bad verifiers. However, it is also more centralized than PoW and PoS consensus mechanisms because of the limited number of verifiers.
Blockchain Network Security Mechanisms
Network security mechanism is the key factor to ensure the integrity and stability of blockchain network systems.
Distributed network: decentralized multi-node operation
Traditionally network services are usually deployed on centralized servers, which can easily lead to application and network lag and downtime when one of the centralized servers goes down. However, blockchain systems mostly use distributed network architecture, which allows decentralization and fault tolerance, and reduces the possibility of a single point of failure. If some nodes experience an attack or data loss, the relevant data can still be recovered from other functioning nodes to keep the network up and running.
Node Authentication: Helping to maintain the network
Unlike banks and centralized use of third parties to verify transactions, blockchain uses a decentralized network of computers, often referred to as nodes or miners, to check the reliability of transactions. Nodes ensure the validity of transaction data, keep the network secure and reliable, and are responsible for adding this data to blocks to package them on the chain.
Nodes are key players in recording, verifying, and processing all data, allowing others to use cryptocurrencies, make anonymous and secure peer-to-peer payments, and even assist DApps in executing smart contracts and more complex transactions. When nodes function properly and keep the blockchain network in a proper state, they are rewarded with a certain amount of money, also known as "mining".
Disclaimer
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Crypto investment involves significant risks. Please proceed with caution. The course shall not be considered investment or financial advice.
Next: Lesson 3 - Common Types of Security Attacks in Blockchain