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Blockchain Consensus Mechanisms and What Makes Elastos Unique
What is a consensus mechanism and how is Elastos’ Elastic Consensus unique?
Cryptocurrencies, both those focused on speculation or utility, have emerged as a new class of assets that promise to revolutionize the way we conduct transactions, exchange value, and send money across the globe. One of the key features that sets cryptocurrencies apart from traditional fiat is their decentralized nature, enabling users to transact directly with each other without the need for intermediaries like banks or financial institutions. Owning one’s financial destiny is a key piece to the ethos of Web3.
In order to facilitate secure and reliable transactions in a decentralized way, cryptocurrencies rely on a consensus mechanism — a set of rules that govern how transactions are validated and recorded on a blockchain. This consensus ensures that all the nodes in a network agree on the validity of a transaction (or a block of transactions), which helps to prevent fraud and ensure the integrity of the network. Decentralization gives power back to individuals, enabling a trustless and censorship-resistant system.
A few consensus mechanisms are in use today across several Layer 1 blockchains, each with its own strengths and weaknesses.
- Proof-of-Work (PoW)
- Proof-of-Stake (PoS)
- Delegated Proof-of-Stake (DPoS)
Elastos is unique in the sense that, with its rich history, it can deliberately decide what works best as a hybrid network, bringing the positives from a few consensus mechanisms together into one platform. Below we will touch what is a consensus mechanism and how is Elastos’ Elastic Consensus unique.
- Requires miners to solve a cryptographic puzzle to add new blocks to the blockchain
- Designed to be difficult to solve but easy to verify to ensure network security and consistency
- Potential centralization, the problem of 51% attacks, resource-intensive
- Examples: Bitcoin, Litecoin, Dogecoin
PoW is based on a simple idea: in order to add a new block to the blockchain, miners must solve a cryptographic puzzle that requires significant computational power. The first miner to solve the puzzle is rewarded with new coins, and the block is added to the blockchain. This process ensures that the network remains secure, as it is difficult for any one entity to control a majority of the mining power required to solve the puzzle.
While PoW has been successfully provided a secure and reliable means of validating transactions, it is also associated with some significant drawbacks. One of the most notable is the potential for centralization. PoW mining requires significant computational power, which means that large mining pools are more likely to succeed in solving the cryptographic puzzle and adding new blocks to the blockchain.
Additionally, PoW is also associated with the problem of 51% attacks. A 51% attack occurs when a single entity controls 51% or more of the network’s mining power, which allows them to manipulate the blockchain and potentially double-spend coins.
- Requires users to hold cryptocurrency to participate in the validation process, with more coins leading to a greater chance of being selected to validate transactions
- Users stake their coins by holding them in a designated wallet or smart contract
- Faster, more energy-efficient, and accessible
- Concerns around centralization and the possibility of chain splits and double-spending
- Examples: Ethereum, Cardano
PoS is another popular consensus mechanism that requires users to hold a certain amount of cryptocurrency in order to participate in the validation process. Users who hold more coins are given a greater chance of being selected to validate transactions. In this system, users stake their cryptocurrency by holding it in a designated wallet or smart contract.
PoS is also much cheaper and more energy-efficient than PoW, as it does not need high computational requirements or expensive mining equipment. PoS allows for greater decentralization of the network compared to just a few large mining pools.
However, PoS is not without its drawbacks. Since validators are chosen based on the amount of cryptocurrency they have staked, those with the largest holdings have the greatest chance of being selected. Another issue with PoS is the potential for so-called “nothing at stake” attacks. In the event that two conflicting blocks are created, validators have nothing to lose by validating both of them, which can lead to a chain split and the potential for double-spending.
Delegated Proof-of-Stake (DPoS)
- Allows token holders to vote for delegates who validate transactions and add them to the blockchain
- More democratic and scalable than others
- Problems with vote buying and collusion among delegates, as well as the possibility of multiple versions of the blockchain
- Examples: Solana, Tron, Tezos
Delegated Proof-of-Stake (DPoS) allows token holders to vote for delegates responsible for validating transactions and adding them to the blockchain. Delegates are incentivized to act in the network’s best interest, as they are rewarded with new coins for their efforts.
DPoS is often seen as a more democratic alternative, as it allows token holders to participate in the validation process who create new blocks on the blockchain to prevent centralization.
Another benefit of DPoS is that it is more scalable than other consensus mechanisms based on handling more transactions per second, which is essential for blockchain applications that require high throughput. DPoS achieves scalability by allowing a smaller group of delegates to validate transactions rather than relying on every node in the network to validate each transaction.
Elastic Consensus — What Makes Elastos Unique?
- Elastic Consensus combines PoW, PoS, and DPoS to improve scalability, accessibility, and security.
- Bond ELA tokens for 10 days for equity tokens in exchange for chosen validators to participate in consensus
What is a consensus mechanism and how is Elastos’ Elastic Consensus unique?
Elastos is launching a new hybrid consensus mechanism that combines elements of PoW, PoS, and DPoS to ensure the security and reliability of the network while also allowing for greater scalability and accessibility. Elastic Consensus is a pioneering approach to decentralization, providing flexibility and security through three consensus mechanisms: auxiliary proof of work, variable bonded proof of stake and proof of integrity that enables a robust transaction execution environment.
The Elastos Main Chain is an independent public, open-source blockchain with 50%+ BTC hash power, ensuring it is one of the most secure blockchains in Web3. The Main Chain utilizes the Elastic Consensus, which includes Auxiliary Proof-of-Work (AuxPoW), Variable Bonded Proof-of-Stake (BPoS), and Proof of Integrity (PoI).
AuxPoW leverages the security of Bitcoin without adding to the computational load required to maintain the blockchain. The innovative variability of the Elastos BPoS mechanism improves the staking model, increases validator set mobility and helps guarantee block finality. Lastly, the ecosystem’s governing DAO (The Cyber Republic) provides 12 unique annually-elected entities to run validator nodes – we call this part of the consensus Proof of Integrity. Just like regular BPoS validators, PoI validators are randomly selected for duty in each block production cycle.
Together, all three mechanisms provide a robust transaction execution environment while offering flexibility to validators who choose to help secure the Elastos ecosystem.
Unlike other blockchains, users can opt to bond their ELA tokens for as little as 10 days to a maximum of 1,000 days in return for equity tokens which can be staked with validator(s) of their choosing. For example, 10 days earns users one vote, 100 days earns them two votes and 1000 days earns them a 3 vote equity.
Validators may be registered by depositing 2,000 ELA for a minimum commitment of 100 days. However, in order to begin participating in consensus and earning rewards, a validator must first be nominated by receiving a minimum of 80,000 equity votes.
This flexibility that gives this new hybrid consensus mechanism its name: Elastic Consensus.
A decentralized Web3 relies on consensus mechanisms to ensure the security and reliability of transactions on their networks. Several consensus mechanisms are available, each with their own strengths and weaknesses.
Elastos stands out by using a hybrid approach that combines the positives from various consensus mechanisms, providing greater efficiency, scalability, and security. Ultimately, however, the choice of consensus mechanism will depend on the network’s needs and its users’ goals.
This article is the first in a series about the new Elastic Consensus. Stay tuned for more details and an exciting incentive program in the coming weeks ahead of deployment. If you want to learn more about the upcoming Elastic Consensus and BPoS launch and how to deploy and run a node, please visit our new developer portal.
The article and graphics were created by the Elavation Team.