Blockchain is a distributed network that provides immutability, privacy, security, and transparency, without any third-party control to validate and verify the transactions. In spite of this, every transaction is considered to be completely secured and verified. This is possible only because of consensus protocol, the core of Blockchain decentralization paradigm.
Consensus is a set of rules by which all the peers of the blockchain network come to a common agreement on the data & the state of the ledger and achieve trust between the unknown peers in the blockchain network. In simple terms, consensus algorithm decides the next block to be appended to blockchain.
Public Networks vs B2B Networks
It is no brainer that why public networks like Bitcoin and Etherum need consensus mechanism. All the nodes are anonymous and there is absolutely no legal entity ownership of the network and transactions. Hence it is critical that a self sufficient and automatic protocol governs the network and keeps the decentralization alive.
The fundamental theme behind public network consensus mechanism is to incentivize the members to participate in consensus algorithm execution. Without incentive of earning digital currencies through this process, participation of members will fade away and whole network will collapse.
These members run complex mathematical algorithms on transactions to ensure they are securely and correctly created on the network. In return these members of network earn Digital Currencies.
Some of the popular public network consensuses are
Ø Proof of Work (POW)
Ø Proof of Stake (POS)
Ø Practical Byzantine Fault Tolerance (PBFT)
Ø Proof of Burn (PoB)
Private – B2B Network Consensus
If private B2B Blockchain network is already created among trusted and known sources, then why do we need consensus mechanism?
This is to keep the decentralized, fault tolerant nature of network intact. If we have pre -determined and fixed node to validate the transactions all the time, then we are moving away from the concept of decentralization. Hence it is important that there is a protocol or algorithm to select the master node from existing nodes, who has the authority to validate transactions and create blocks in the network
This protocol is called – Proof of Authority (POA)
This mechanism comes with two main benefits.
a) Letting just one node validate and finalize transactions on the network improves performance considerably compared to public networks.
b) An algorithm which keeps changing the authority of the participant nodes, ensures that the power of block creation remains decentralized.
Quorum blockchain network uses RAFT and IBFT consensus mechanisms to keep your private networks secure, validated, decentralized and high performant.
Vincilium is here to advise clients chose right network configuration and consensus mechanism for their use cases.