Inside the blockchain developer’s mind: Blockchain consensus, Part 1

0
113

Cointelegraph follows the development of a brand new blockchain from start to finish and beyond with its series, Inside the Blockchain Developer’s Mind. In previous parts, Andrew Levine of Koinos Group discussed some of the challenges The team has been dealing since the identification of the key issues they intend to resolve and outlined three of the “crises” that are holding back the adoption of a blockchain: upgradability, scalability, and irrigated. This series focuses on the consensus algorithm: the first part is about proof of work, the second part is about proof of interest and the third part is about proof of burn.

In this article, I want to take advantage of my unique perspective to help the reader gain a deeper understanding of a popular concept in blockchain technology, but also one that is sadly misunderstood: the consent algorithm.

To gain a deep understanding of this blockchain component, one of the things I always like to do in these articles is to start by stepping back and looking at the big picture because the consent algorithm is just a small part of a much larger system.

Blockchains are a game in which players compete to validate transactions by grouping them into blocks that match the transaction blocks created by other players. Cryptography is used to hide the data that would allow these people to cheat. A random process is used to distribute digital tokens to people who play by the rules and produce blocks that match the blocks sent by other people. These blocks are then chained together to create a verifiable record of all transactions that were once made on the network.

6b0fea89 0254 4ced 84bf d30daf2efd37

When people produce new blocks with different transactions in them, we call this a “fork” because the chain is now moving in two different directions. This is exactly the opposite of what we want to happen. The whole value of a blockchain stems from the fact that everyone agrees – came to an agreement – on what transactions took place when. Consensus algorithms are therefore intended to solve forks.

Satoshi’s real innovation

At the end of the day, what makes sure everyone is updating their database to match each other is how they are punished when they don’t. The protocols contain rules for the proper ordering of transactions, but if there is no consequence for violating those rules, they will be ineffective. The real innovation that Satoshi Nakamoto delivered in the white paper Bitcoin (BTC) was his elegant use of economic incentives.

Satoshi Nakamoto did not invent the idea of ​​”electronic currency”. He created an elegant system for combining cryptography with economics to take advantage of electronic currencies, now called cryptocurrencies, to use incentives to solve problems that algorithms alone cannot solve. Its design forced people to sacrifice money to erase blocks of transactions. People should sacrifice this money over and over again by playing by the rules of the system and trying to organize transactions into blocks that would be accepted by everyone else on the net. If they did this long enough, they would receive a reward in the currency of the platform.

Of course, the blockchain cannot know that money was spent in the form of USD, yen or euro, so he used a proxy in the form of insignificant work. He made the mining of blocks unnecessarily difficult, so anyone who successfully mined a block must have spent money on hardware and the energy to operate that hardware. So every block successfully mined is backed by money that has been sacrificed not only on the hardware, but on the energy needed to power that hardware and produce that block. Whenever there are forks, proof-of-work (PoW) consensus algorithms are an automated system by which the fork supported by most work is the “correct” fork.

Related: Proof of interest versus proof of work: Differences explained

This means that everyone who continues to produce blocks on that fork will continue to earn rewards, and everyone who continues to produce blocks on that other fork will not earn rewards. Since these people have already spent their money to get hardware and operate it to produce blocks, the punishment is easy because they have already been fined. They’ve spent their money so if they want to continue to produce blocks on the wrong chain, that’s fine. They will not win rewards and they will not get their money back. They will have sacrificed that money for nothing. Their blocks will not be accepted by the network and they will not win tokens.

This proof system ensures that the only way someone who doesn’t want to play by the rules, a malicious player, is to get and run more hardware than all the others combined, for example with a 51% attack.

ed10499b 7040 470a 8adb 47d8471a87ce

This is the elegance behind proof-of-work. The system cannot function without sacrificing ever-increasing amounts of capital. Satoshi has combined cryptography and economics to create a transaction ledger that is so reliable, it is unreliable.

There are, however, different consent algorithms that work in slightly different ways. The best known of which is proof-of-stake (PoS), which I will discuss in the next article in this series. After that, I will discuss the algorithm we will use in Koinos, which is the first of its kind in a general-purpose blockchain.

The opinions, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Andrew Levine is the CEO of Koinos Group, where he and the previous development team behind the Steem blockchain are building blockchain-based solutions that enable people to take ownership and control of their digital selves. Their core product is Koinos, a high-performance blockchain built on a brand new framework designed to give developers the features they need to deliver the user experiences needed to spread the adoption of blockchain to the masses.