Blockchains use a variety of consensus models that enable a group of mutually distrusting users to work together.
Many mining nodes are competing at the same time to solve a puzzle to gain the right of publishing the next block (and if applicable, a financial award). They are generally mutually distrusting users that may only know each other by their public addresses. Each user may be motivated by a desire for financial gain, not the well-being of the other mining nodes or even the network as a whole. In such a situation, why would a user propagate a block solved by another user? Also, who resolves conflicts when multiple mining nodes solve a block at approximately the same time? To make this work, blockchains use a variety of consensus models that enable a group of mutually distrusting users to work together. Note that when a user joins a blockchain system, the user agrees to the initial state of the system. This is recorded in the only pre-configured block, the genesis block. Every blockchain has a published genesis block and every block must be added to the blockchain after it, based on an agreed-upon consensus method.
Regardless of the method, however, each block must be valid and thus can be validated independently by each user in the blockchain network. By combining the initial state and the ability to verify every block since then, users can agree on the current state of the blockchain. Note that if there were ever two valid chains presented to a user, the default mechanism, in most blockchain systems, is that the longer chain is ‘more’ valid and should be adopted (this happens occasionally and will be discussed later).
The following properties are then in place:
The initial state of the system is agreed upon.
Users agree to the consensus method by which blocks are added to the system.
Every block is linked to the previous block with a hash (except for the first ‘genesis’ block, which has no previous block, and usually has a hash value of all 0’s for the previous block).
Users can verify every block.
In practice, node software handles all the details. Key to the blockchain approach is that there is no need to have a trusted third party to give the state of the system—every user within the system can verify the system’s integrity. To add a new block to the blockchain, all participating nodes must come to a common agreement over time, however, so some temporary disagreement is permitted. The method of agreement (or consensus) must work even in the presence of possibly malicious users attempting to disrupt or take over the blockchain. This section discusses several major consensus models, as well as conflict resolution.
Proof of Work Consensus Model
In the proof of work model, a user gets the right to publish the next block by solving a computationally intensive puzzle. The solution to this puzzle is the “proof” they have performed work. The puzzle is designed such that solving the puzzle is difficult, but checking that a solution is valid is easy. This enables all other mining nodes to easily validate any proposed next blocks, and any proposed block that did not satisfy the puzzle would be rejected. A common puzzle method is to require that the hash of the block be less than a certain value. Mining nodes then make many small changes to the block (the nonce) trying to find a block hash that meets the requirement. For each attempt, the mining node must compute the hash for the entire block header, which is a computationally intensive process. The required value may be modified over time to adjust the difficulty to influence how often blocks are being published. For example, Bitcoin, which uses the proof of work model, adjusts the puzzle difficulty every two weeks to influence the block publication rate to be around once every ten minutes.
An important aspect of this model is that the past work put into a puzzle does not influence one’s likelihood of solving future puzzles. Hashing a candidate block one thousand or one million times (with different nonce values) only increases the likelihood of solving the current puzzle (as the nonce input space is being reduced with each hash calculation), it does not increase the user’s likelihood of solving any future puzzles, and therefore each puzzle to solve for a block is independent and requires the same amount of work. This means that when a user receives a completed block from another user, they are incentivized to include the new block because they know the other mining nodes will include it and start building off it. If they refuse to accept the new block, they will be building off a shorter chain of blocks and (as mentioned previously) by default, the longest valid chain is adopted.
There is no shortcut to this process; mining nodes must expend computation effort, time, and resources to find the correct nonce value for the target. Once a user has performed this work, they send their block with a valid nonce to the other nodes in the network. The recipient nodes verify that this work was done properly, add the block to their copy of the blockchain, and resend the block to their peer nodes. In this manner, the new block gets quickly distributed throughout the network of participating nodes. Verification of the nonce is easy since only a single hash needs to be done to check to see if it solves the puzzle.
The proof of work consensus model is designed for the case where there is little to no trust amongst users of the system. It ensures mining nodes cannot game the system by always being able to solve the puzzles and thereby control the blockchain and the transactions added to it. However, a major pitfall of the proof of work consensus model is its excessive use of energy in solving the puzzles. This is not trivial; for example, currently the Bitcoin blockchain uses more electricity than the entire country of Ireland, and it has been speculated that it will consume as much electricity as the entire country of Denmark by 2020. Software and hardware continually improve, with the result that puzzles can be solved more efficiently, but blockchain networks are growing, and the puzzle targets get harder as more mining nodes participate. Due to the increasing difficulty of the proof of work puzzles, it is becoming harder for any one computer to solve a puzzle. Therefore, mining nodes have organized themselves into “pools” or “collectives” whereby they collectively solve puzzles. This is because it is possible to distribute the work between two or more nodes across a collective to share the workload and rewards.
Proof of Stake Consensus Model
The proof of stake model is based on the idea that the more stake a user has in the system, the more likely it will want the system to succeed, and the less likely it will want to subvert it. Proof of stake blockchain systems use the amount of stake a user has as a determining factor for new block creation. The methods for how the blockchain system uses the stakes can vary – from random selection of staked users, to multi-round voting, to a coin aging system. Regardless of the exact approach, users with more stake are more likely to produce new blocks.
With this consensus model, there is no need to perform resource intensive computations (time, electricity, processing power) as found in proof of work. Since this consensus method employs less resources, some blockchains have decided to forego a reward for new block creation; these systems are designed so that all the cryptocurrency is already distributed among users rather than new coins being generated at a constant pace.
Within a proof of stake blockchain system, where the choice of block creator is a random choice (sometimes referred to as Chain-based proof of stake), the blockchain system will look at all users with stake and choose amongst them based on their stake to overall system stake ratio. So, if a user had 42% of the stake they would be chosen 42% of the time; those with 1% would be chosen 1% of the time.
When the choice of block creator is a multi-round voting system (sometime referred to as Byzantine Fault Tolerance proof of stake) there is added complexity. The blockchain system will select several staked users to create proposed blocks. The system will then ask all staked users to vote for the next block. After several rounds of this voting, a new block is decided upon. This method allows all staked users to have a voice in the block selection process for every new block. Finally, there is a method of proof of stake which allows users to create blocks by “spending” aged cryptocurrency (sometimes referred to as “Coin age” proof of stake). The user’s staked cryptocurrency has an additional “age” property, and after a certain amount of time (such as 30 days) the staked cryptocurrency can be “spent” and allow the user to create a new block on the blockchain. The “spent” cryptocurrency then has its “age” reset to 0, and it cannot be used again until after the requisite time has passed. This method allows for users with more stake to create more blocks, but to not dominate the system – since they have a cooldown timer attached to every cryptocurrency spent creating blocks.
Under proof of stake systems, the “rich” can more easily stake more of the digital assets, earning themselves more assets; however, to obtain the majority of assets within a system in order to “control” it is generally cost prohibitive.
Round Robin Consensus Model
In some blockchain systems there does exist some level of trust between mining nodes. In this case, there is no need for a complicated consensus mechanism to determine which participant adds the next block to the chain. This consensus model is often used for private blockchains and is called round robin, where nodes take turns in creating blocks. To handle situations where a mining node is not available when it is their turn, these systems may include an element of randomness to enable available nodes to publish blocks so that unavailable nodes will not cause a halt in block production. This model ensures no one node creates the majority of the blocks, it benefits from a straightforward approach, it lacks cryptographic puzzles, and has low power requirements.
Unfortunately, due to the need for some level of trust amongst nodes, round robin does not work well in the permissionless open networks used by most blockchain based cryptocurrencies because malicious nodes can continuously add additional nodes to increase the odds of subverting the network.
Ledger Conflicts and Resolutions
It is possible that multiple blocks will be published at approximately the same time. This can cause differing versions of a blockchain to exist at any given moment; these must be resolved quickly in order to have consistency in the blockchain.
With any distributed network, some systems within the network will be behind on information or have alternative information. This depends on network latency between nodes and the proximity of groups of nodes. Blockchain systems that allow any node to generate blocks are more prone to have conflicts due to this openness. A major part of agreeing on the state of the blockchain system (coming to consensus) is resolving conflicting data.
Conflicts are usually quickly resolved. Most blockchain systems will wait until the next block is generated and use that chain as the “official” blockchain, thus adopting the “longer blockchain”.
Source: National Institute of Standards and Technology, U.S. Department of Commerce (Jan 2018)
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