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Types Of Consensus Algorithms

By Divya Singh | Aug. 1, 2018, 8:16 a.m. GMT

Consensus algorithm is a process in computer science used to achieve agreement, reliability on a single data among distributed processes of systems involving multiple nodes. In a blockchain platform consensus algorithm plays a very important role in attaining its key characteristics- "Decentralization". In blockchain, every transaction added in the system only after it is approved by all the nodes. 

Consensus mechanisms lower the risk of fraudulent transactions.

There are different consensus algorithms, let's have a look at all of them:

Proof of Work:

One of the most commonly used consensus mechanism is Proof of Work. It is like a lucky draw. Miners have to solve a difficult cryptographic puzzle by a trial and error method. Whoever gets the value first is the winner and is able to add the block and get the reward. Proof of work requires a lot of computational power and a lot of energy is wasted. There is no specific formula to calculate the value of nonce. It can be solved by trial and error method only. Refer to this blog to see why we need an alternative of PoW.

Bitcoin and most of the cryptocurrencies use PoW consensus algorithm.

Proof of Stake:

This is still being evaluated by some major Blockchain networks. Here, miners do not have to solve any mathematical puzzle and burn electricity. However, miners who possess the maximum number of coins of the network get to validate the transaction first. This is an attempt to solve the scalability concern of a Blockchain network due to high power consumption in Proof of Work. Proof of Stake will make the transaction in Blockchain faster as compared to Proof of Work. The challenge with this model is that the powerful will become more powerful. This is quite opposite to the idea of decentralized systems.

Click here to read about the difference between PoW and PoS.

Dash uses PoS consensus algorithm. 

Proof of Activity:

PoA is hybrid of PoW and PoS. First, miners need to solve the puzzle using computational power same as PoW. Once the miners have solved the puzzle, system switches to PoS. The block with header and miner rewards is assigned to a group of validators or signers to verify the block. Here, the one who has more cryptocurrency of the network is selected by the system to be a signer. If a signer is not available to validate the block, a block is moved to another group for validation. Since PoA is a mixture of both PoW and PoS and is not helping in saving energy, why do we switch to it? PoW and PoS both are susceptible to 51% attack. But in PoA the signers are selected randomly by the system depending on the number of cryptocurrencies they have. There is no guarantee that the group of signers will be same every time, so chances of 51% attack are less, making the system relatively safer.

Decred cryptocurrency system uses  PoA consensus algorithm. 

Proof of Burn:

PoB is a mechanism, where the miners get chance to mine a block on the basis of cryptocurrencies they have burned. How does the system decide who has burned the coins? Here miners have to send any cryptocurrencies like Bitcoin, Ether to a verifiably unspendable address. By sending more coins you increase the chance of getting a block to mine. This system is criticized as this also involves wastage of a lot of resources. This mechanism is also quite against the idea of decentralization.

Slimcoin is the only cryptocurrency to use PoB consensus algorithm 

Proof of Capacity:

PoC is an interesting mechanism. Here, to mine a block you need to prove that you have more storage capacity in your hard drive. Before mining, the system generates large data sets known as "Plots", which you are supposed to store on your hard drive. The more plots you have the chances of getting a block to mine increases.  Proof space and Proof of Storage are variations of Proof of Capacity. This mechanism is against the concept of decentralization. A rich person can acquire more hard drive capacity making her more probable to mine a block.

Burstcoin uses PoC consensus algorithm. 

Proof of Elapsed Time:

PoET is used by private or permissioned Blockchain network. In this network, the nodes are assigned random wait period. All the nodes have to wait to finish the waiting period in order to mine, The one who has the shortest wait time is the winner. Intel launched this mechanism in 2016. This mechanism helps in saving the resource but has one of the biggest drawbacks. We try to avoid third party trust in a blockhain network, however here we need to trust Intel for allocating random time to nodes and being fair, so it not suitable for a public blockchain.


Developers are working on creating the best consensus algorithm which will save energy, resources and will keep the network clean while maintaining the true decentralized nature of the network. If you know any more consensus algorithm, do let us know in the comment section below, we will definitely study and add it to the blog.

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