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PoW, PoS, PoA—The most popular blockchain consensus mechanisms

By Rain İçerik Ekibi - Apr 28, 7:00 PM

A blockchain is as secure as its consensus mechanism, so choosing the right one is vital for any ecosystem. In this article we’ll break down the most popular ones out there, outline their pros and cons, name a crypto project that utilizes it, and conclude which one is the most optimal solution in our view. 

What is a consensus mechanism?

A consensus mechanism is the system a network’s nodes use to establish agreement between each other. Without agreement, transactions could not be validated, which would effectively shut down any network. A consensus mechanism sets the basic rules to follow for nodes, as well as provides the reward and punishment frameworks that every participant needs to comply with. When analyzing consensus mechanisms, we looked at their processing speed, security, environmental aspect, and scalability, which are among the most important features of such systems. With that, onto the specific types.

Proof-of-Work (PoW): Bitcoin (BTC)

Proof-of-Work (PoW) is the first blockchain consensus mechanism that was introduced by Bitcoin upon its launch. With PoW, nodes need to establish consensus based on computational work, which is where the mechanism’s name comes from. Once a node manages to calculate the so-called hash of a block, it needs to broadcast the findings to all other nodes, who update their copy of the blockchain accordingly, and move on to the next block. Proof-of-Work is really secure, and other than one or two highly theoretical weak points, it operates flawlessly. The issues many experts have with PoW is its limited processing speed, high energy consumption, and unscalable nature. 

Proof-of-Stake (PoS): Cardano (ADA)

Proof-of-Stake (PoS) is one of the most widely adopted consensus mechanisms centered around a collateral-based framework. Simply put, nodes need to put up (stake) a predetermined amount of their crypto tokens in order to start validating transactions and receive rewards for their efforts. If a node attempts a sabotage or behaves in a malicious way, its stake is seized and credited to the ecosystem’s treasury. This disincentivizes all nodes to act in such a way, thereby ensuring the security and integrity of validated transactions. Contrary to PoW, Proof-of-Stake is highly scalable, environmentally-friendly, and fast in terms of processing speed. The only drawback of such systems is said to be the highly theoretical threat of a Byzantine Fault, which is basically when the majority of validators team up and sabotage the network together.

Proof-of-Authority (PoA): VeChain (VET)

Proof-of-Authority (PoA) is a departure from both other mechanisms on this list, as it does not require any computational work, nor tokens staked for validation. Instead, nodes put their reputation on the line when confirming transactions. In PoA, the overall amount of pre-selected nodes is small, which makes it highly scalable, but poses the potential threat of lowered decentralization. In any case, Proof-of-Authority (PoA) is among the most innovative consensus mechanisms that can help any crypto ecosystem grow at a great pace without compromising on security.

A consensus mechanism is one of the most important elements of any blockchain. Proof-of-Work (PoW), Proof-of-Stake (PoS), and Proof-of-Authority (PoA) are among the most popular ones of their era, and while they are all considered highly secure, the overall best consensus seems like Proof-of-Stake (PoS). PoS not only offers high scalability, and security, but also ticks the box next to energy efficiency, making it the current most optimal solution for most crypto ecosystems.

Rain is a Crypto-Asset Services Provider headquartered in İstanbul. Rain provides services to its users at financial institution standards.

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