Top Consensus Algorithms: Everything you need to know!

For every consensus algorithm, the goal is to decentralize the power structure of the platform, and no one individual regulates over the inclusion of a transaction in a block, and also everyone agrees on the same order of events.

Once you achieve these two factors, that no individual regulates the inclusion of a transaction in a block (an individual or a group of individuals) and everyone agrees on the same order of events, then you just have to apply a consensus mechanism( rules that govern the miners or the validators of the transaction and blocks).

We will be discussing the different consensus mechanism/algorithm that various platforms have adopted in order to establish governance in their platforms. While there are many other proposed consensus mechanisms, we will be focusing on the ones that have been adopted or sounds promising enough.

POW(Proof of Work)

Proof of work is the first consensus algorithm that was being used in Bitcoin, it was proposed by Satoshi Nakamoto in the whitepaper Bitcoin A peer to peer Electronic Cash System where this consensus mechanism was being used.

The idea of Proof of Work initially was published by Cynthia Dwork and Moni Naor in a 1993 journal article, however, it wasn’t until 1999 the actual term “Proof of Work” was coined by Markus Jakobsson.

The motive of this consensus algorithm was to ensure the decentralization of the network and so that no individual entity should take over the network, theoretically this would ensure the network is trustless and distributed.

The Proof of Work miners solves encrypted problems which can be solved through brute force. This requires a lot of electricity as energy, as the miners have to solve these encrypted problems in order to verify a block, this ensures that no miner is getting an unwanted advantage over other miners.

However, this method of arriving at a consensus is not the most efficient one because a lot of energy is being wasted, the Proof of Work’s encrypted problem’s difficulty keeps on increasing which asks for more computational power, which leads to the burning of more electricity.

 BitcoinLitecoinDogecoin, use Proof of Work as their consensus mechanism.

POS(Proof of Stake)

Proof of Stake also serves the purpose of validating the transactions and achieving consensus but the method is a bit different, instead of solving difficult encrypted problems, the miner has to put on a stake for being a block validator ( a miner who validates the block). Supposedly, in a platform, a miner has 20 tokens and another miner has 100 tokens, the miner with 100 tokens has 5 times(100/20) more chances of being the block validator.

The most important factor in this consensus mechanism is, it is energy efficient and it also ensures in contributing to the network itself because, in order to be a block validator a miner has to own the tokens of the similar platform, this ensures the miners are supporting and owning the currency they are verifying.

Ethereum has already planned to move on to POS with their own consensus mechanism known as Casper.

DecredEthereum (soon)Peercoin use Proof of Stake as their consensus mechanism.

DPOS (Delegated Proof of Stake)

DPOS is a variation of the POS, DPOS seeks to reach the consensus more effectively. In DPOS the users in the ecosystem vote for the ‘Witnesses’ (other users who will be validating the blocks) and the top level of Witnesses who have most of the votes. The Witnesses can also delegate their power to other users whom they trust to vote for witnesses on their behalf.

The top tier Witnesses are capped at a certain number, mostly 21 (EOS keeps 21), these Witnesses will be responsible for the validation of the transaction and creation of the new blocks, the Witnesses will be remunerated for the same.

DPOS also uses the delegates who are delegated by the Witnesses who are the trusted parties mainly responsible for maintaining the network, the delegates oversee the governance and also the performance of the decentralized network.

SteemitEOSBitShares use Delegated Proof of Stake as their consensus mechanism.

BFT (Byzantine Fault Tolerance)

The theory suggests that several Byzantine generals and their respective portions of the Byzantine army have surrounded a city. They must decide in unison whether or not to attack. If some generals attack without the others, their siege will end in tragedy. The generals are usually separated by distance and have to pass messages to communicate. Several cryptocurrency protocols use some version of BFT to come to consensus

DAGs (Directed Acyclic Graphs)

DAGs are a form of consensus that doesn’t use the blockchain data structure and handles transactions mostly asynchronously, DAG proposes that it is theoretically possible to achieve infinite transactions per second.


Hashgraph is a gossip-protocol consensus developed by Leemon Baird. Nodes share their known transactions with other nodes at random so eventually all the transactions are gossiped around to all of the nodes. Hashgraph is really fast (250,000+ transactions per second) but isn’t resistant to Sybil attacks. So Hashgraph is a great option for private networks, but you’re not going to see it implemented in a public network like Ethereum or Dispatch any time soon.

 IotaHashgraphRaiblocks/Nano use Directed Acyclic Graphs as their consensus mechanism.

Obelisk (Skycoin’s Consensus Algorithm)

To tackle the centralization problem, Skycoin uses a distributed consensus algorithm, Obelisk. Obelisk distributes influence over the network according to a web-of-trust. There is no mining, instead, the web consists of nodes (e.g.computers, Skyminers, etc.) and each node subscribes to a list of trusted nodes. Nodes with more subscribers hold more influence in the network.
Each node is assigned a personal blockchain that acts as a “public broadcasting channel,” where its every action is publicly recorded and visible.
As all consensus decisions and communication occur through the personal blockchains of each node, the community can easily audit nodes for cheating or collusion—without compromising privacy. The nodes are addressed by their cryptographic public key and a node’s IP address is only known to the nodes it is directly connected to.

Hope we could give you a little light on various Consensus Algorithms that are being adopted by different platforms!

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