Exploring Consensus -- and why YOU matter!

Proof of Importance

Proof of Stake is a well-known and widely used consensus mechanism. The concept of Stake demonstrates that you have skin in the game, which can earn you the right to participate and earn rewards. But of course, you have to have the money to earn the money.

Proof of Importance takes this idea of skin in the game, and tries to measure it in other ways beyond just account balances. Choosing a validator in a PoI system is partially dependent on stake. But it also measures how long you’ve been staked, and how many meaningful transactions you’ve made, and if you have participated in governance. If you hold 10 tokens, you have a certain influence. You can earn more influence by sticking around for longer, or by using the system for financial transactions, etc etc. It’s a really interesting idea if you like the robustness of PoS, but wish there was a way to make it more equitable. So far, PoI hasn’t had a lot of adoption, so it probably needs more road-tests before mass implementation. Known issues are that the scoring rubric can be too complex for users to easily understand, and that coming up with a perfectly balanced score is still really hard. It’s likely that big wallets still dominate the show.

Proof of Contribution

Proof of Contribution is a somewhat similar consensus idea: nodes are selected and rewarded based on a broad measure of their participation in the network. That participation could include computation, storage, transactions, and governance actions. The exact behaviors that are measured and factored together would be unique to every implementation of the mechanism. The advantage is that it can incentivize a wide range of meaningful participation in the network! The downsides are that the calculation and measurement of contribution is likely to be complex, and somewhat subjective. It also introduces a high risk of manipulation and gaming the system by participants: those who figure out how to maximize their “Score” will dominate the system.

Proof of Capacity

Proof of Capacity (PoC) is a blockchain consensus mechanism that allows mining power to be determined by the amount of disk space a miner allocates to the process, rather than computational power or financial stake. It is sometimes referred to as Proof of Space. It’s considered energy efficient, and the hardware needed to do it isn’t specialized or scarce. It is the case, however, that having more of that hardware, and specifically “space” on that hardware, will give you more chances to succeed. For that reason, it may be considered a wasteful use of hardware resources. There are also certain security issues with Proof of Capacity, so if it’s used, it might be better if it is combined with another form of consensus as well.

Proof of History

Solana is a big-name blockchain, and talking about its consensus mechanism brings us to another important point: it’s not a situation where you have to just pick one. Solana uses a mechanism called Proof of History, to put transactions into perfect order, forming a sort of pre-consensus layer. Then it uses its own version of Proof-of-Stake to elect a node to make a block. The PoH layer allows Solana to achieve really high speed and throughput. However, the equipment needed to support it is complex and Pexpensive. This raises concerns about centralization, since not everyone can afford to implement it, or knows how. Solana has also experienced bugs and outages that may be a result of this complexity.

Proof of Authority

In Proof of Authority, validators are pre-approved, and have verified identities. Getting chosen might be based on randomness, or it might go in a pre-determined order, but the important thing is just getting on that list in the first place. Advantages of this consensus mechanism are that it is very quick and efficient, as there is no element of competing for a chance to play, or “buying lottery tickets”, or anything. Also, block producers are known, trusted entities.

On the down side: Proof of Authority doesn’t lend itself well to scalability or decentralization, as the list of known and vetted validators can only be so long. Validators themselves might be opening themselves up to public or regulatory scrutiny, which could be a disincentive to participation. There are public blockchains using Proof of Authority, such as VeChain. Ultimately, Proof of Authority might make more sense in a private blockchain, or in a hybrid application.

Proof of Activity

I’ve mentioned the idea of hybrid consensus a few times. Proof of Activity is by its definition a hybrid. It uses Proof of Work consensus for picking who gets to form a block, and Proof of Stake to decide who gets to validate it. It inherits the high security of PoW, balanced with the lower energy demands of PoS. It also has some advantages in terms of equity and sharing the work and rewards – splitting up the work of minting and validating means that more people can participate and get rewarded. (All that shared work keeping everyone busy is why it’s called Proof of Activity!) On the downside, the PoW involvement does mean it’s still pretty energy intensive, and overall the hybrid model means some inherent complexity. The best known (but still fairly obscure) implementation of this on a public blockchain is on Dcred (DCR).

Proof of Burn

This one cracks me up. In Proof of Burn consensus, would-be validators prove their commitment to the system by “Burning” tokens – permanently destroying them. Those who burn the most tokens are favored with better luck to get picked to mint and validate blocks, and earn rewards. In the lottery ticket analogy, PoB consensus is like just …..buying more lottery tickets. I guess the balance is in burning enough tokens to get picked, but not so many that the rewards don’t cover it! The downside of this method is that it is wasteful. Only wealthy participants can afford to destroy their own value in hopes of getting lucky. To my mind, it seems like it would encourage strange psychological games that might not be the most healthy.

Proof of Elapsed Time

This one feels like a full counterpoint to Proof of Burn. Instead of maniacally throwing your tokens into a fire, a Proof of Elapsed Time nodes just … wait their turn. Even the acronym is peaceful: PoET. PoET consensus is extremely energy efficient, and absolutely fair – any node that is patient enough will get a turn to mint a block. The challenge with PoET is that maintaining security and fairness requires every node to run very specialized hardware. For this reason, it’s not being used by any public permissionless blockchains that I’m aware of. It is a good candidate for private enterprise blockchains, where appropriate hardware can be provisioned for the network. Maybe future innovations will allow us to use PoET in the public space – fairness is nice, and I think the blockchain world could use a bit of a softer side sometimes.

Conclusion

As you can clearly see, people have already thought of quite a few ways to approach consensus, but I’d be willing to bet that the idea phase isn’t over. While a lot of really smart brains have already applied themselves to these questions, this field of exploration is still incredibly young. There will be more ideas about how to achieve the most ideal form of consensus, and many more attempts to get the best of all worlds from a hybrid approach.

Even if you are not a cryptography expert, your informed participation is an important part of this future. In 1907, Francis Galton first documented the “Wisdom of Crowds” at a livestock fair. Hep found that when people were asked to estimate the weight of an animal, individual guesses were wildly inaccurate. However, when taken in aggregate, the guesses of a large crowd tended to identify the real weight of the animal with shocking accuracy. The idea has since been studied extensively and forms the basis for fields like collective intelligence, prediction markets, and crowdsourcing.

What I mean to say is: your thoughts, guesses, and ideas are important, especially when you engage with the collective. I think it’s possible that the best solution for consensus will be found through…. consensus!

So, for any blockchain that you are involved in, take a moment now and then to learn about how it is achieving consensus, and be aware of the downsides that may be part of it. There is a lot of interesting science about the wisdom of the crowd