Blockchain Technology and Digital Governance- Consensus

Popular Consensus Algorithms explained :

Proof-of-Work ( PoW )

Proof-of-Stake ( PoS )

  • Proof-of-Stake (PoS) could be beneficial because of its low entry barrier, any one who holds certain amount of coins can enter a validator pool and become a validator by staking the coins, no need of mining equipment, energy costs , setting up a machines and maintaining them, but the problem arises when a small number of entities owns the significant supply of the coins, they will have a higher chance of validating the transactions, and in the form of rewards their stake increases evenmore which could lead to supply centralisation overtime, this can become a concern to address, because the stakers can vote for multiple forks of a blockchain by using their staking power, taking this into consideration many PoS blockchains now have a system which has PoW & PoS combined to ensure the final validation to be on a valid chain. Proof-of-Stake is a relatively new concept , researchers are finding their ways to eliminate these problems and improve the protocol. we could see some breakthroughs happening in the near future.
  • Delegated Proof-of-Stake (DPoS) protocol is scalable because of its slightly centralised nature, even though they cannot change the details of any transactions, the validators in the top tier can prevent some transactions being included in the upcoming block (which is debatable for different reasons), top tier validators always at a risk of being replaced by a user who gets more votes, users within the system can always remove them if they become unreliable, voters in the system can also elect a group of delegates who can function as a trusted entities to secure and maintain the network and these delegates are responsible for the total governance of the protocol and they are incentivised for constantly creating things valuable to the community, they do not play any role is block creation and validation, but as a part of maintaining the network the group of delegates can propose changes.. for example changing the blocksize etc. DPOS is the next step in the evolution of protocols.

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