Blockchain consensus algorithms
We can define a consensus algorithm as the mechanism through which a blockchain network reach consensus. The most common implementations are Proof of Work (PoW) and Proof of Stake (PoS). But let’s take the Bitcoin case as an example.
While the Bitcoin protocol prescribes the primary rules of the system, the PoW consensus algorithm is what defines how these rules will be followed in order to reach consensus (for instance, during the verification and validation of transactions).
Although the concept of Proof of Work is older than cryptocurrencies, Satoshi Nakamoto developed a modified version of it as an algorithm that enabled the creation of Bitcoin as a BFT system.
Note that the PoW algorithm is not 100% tolerant to the Byzantine faults, but due to the cost-intensive mining process and the underlying cryptographic techniques, PoW has proven to be one of the most secure and reliable implementations for blockchain networks. In that sense, the Proof of Work consensus algorithm, designed by Satoshi Nakamoto, is considered by many as one of the most genius solutions to the Byzantine faults.
The Byzantine Generals’ Problem is an intriguing dilemma that eventually gave rise to the BFT systems, which are being extensively applied in various scenarios. Beyond the blockchain industry, a few use cases of BFT systems include the aviation, space, and nuclear power industries.
Within the cryptocurrency context, having an efficient network communication along with a good consensus mechanism is vital to any blockchain ecosystem. Securing these systems is an ongoing effort, and the existing consensus algorithms are yet to overcome a few limitations (such as scalability). Nonetheless, PoW and PoS are very interesting approaches as BFT systems, and the potential applications are certainly inspiring widespread innovation.