Consensus methods remain a defining feature in blockchain technology. While blockchains may be endlessly unique, they must each employ a consensus method. Consensus methods use the data received from network nodes to determine what is accurate and what is faulty. Without an effective consensus mechanism, blockchains would be unreliable and therefore useless.
While proof-of-work and proof-of stake are the two most commonly used consensus methods, quite a few minor consensus methods exist as well. Investors contemplating a cryptocurrency that employs just such a consensus mechanism should recognize their modus operandi. Several better-known minor consensus methods are listed below.
Proof of Capacity
Proof-of-capacity closely resembles proof-of-work, with the notable exception that transaction blocks are validated using disk space rather than computational power. Participants must allocate a set amount of their disk space to be used exclusively for this purpose. This space is then plotted on the drive and filled with nonces, groups of precomputed hashes containing 4096 pairs (or ‘scoops’).
When mining using proof-of-capacity, deadlines are computed from the scoop numbers on your drive. A deadline timer represents how long a user must wait to mine another block. This system automatically selects the lowest deadline time, and if it hasn’t mined a transaction block within that amount of time, your system will mine it.
Individuals mining blocks by proof-of-capacity must often set aside terabytes of disk space to do so. Nonetheless, proof-of-capacity is far more energy efficient than proof-of-work and does not sacrifice speed or security in the process.
Proof of Importance
Proof-of-importance closely comports with proof-of-stake but with an added twist. Like proof-of-stake, the capacity to mine tokens ties in with the number of tokens held. However, users can also gain additional mining capacity by regularly buying and selling tokens. This mechanism ensures that the price stays at market level. NEM employs this option to encourage the mining of their popular cryptocurrency, XEM.
Proof of Burn
Proof-of-burn is nearly identical to proof-of-stake. However, mining capacity is predicated on the user burning tokens rather than holding them. Burning tokens requires sending them to an address from which they can never return or be sent elsewhere. This process effectively removes the economy of that token. It also results in a deflationary token, one that naturally becomes scarcer over time.
Thus, the more tokens a participant burns, the more likely that participant will be able to mine the next block. The value of the tokens being burned typically balances out with the rewards to be gained. Proof-of-burn can be set up so that a user either burns the token being mined or burns one token to mine another.
Proof of Elapsed Time
Proof-of-elapsed time works by requiring participants to wait a random amount of time before setting upon the next transaction block. The first participant who finishes waiting receives the next block. While organized more like a lottery than a consensus method, it remains a suitable alternative given that its run Intel SGX systems hardware. As such, it allows applications to set protected environments and execute trusted code. It also ensures that the lottery for random wait times is conducted fairly. Critics assert that using SGX hardware to execute the trusted code is a centralizing feature and gives too much power to Intel.
Proof of DDoS
While only theoretical at this point, proof-of-DDoS is a malicious proof-of-work form. In brief, it rewards participants who participate in qualifying DDoS attacks. Introduced by researchers at the University of Michigan, this consensus method works with a fictional DDoSCoin.
As currently envisioned, ‘miners’ collectively select the target for DDoS attacks. The proof comes from creating large numbers of TLS connections with the targeted servers, with that server’s signed responses serving as proof of a connection.
While an unhelpful consensus mechanism, the researchers who designed it exemplify the exceptional creativity that is now invading the blockchain space. Being that we are still in the early stages of blockchain technology, so impossible to predict what the future holds. Revolutionary consensus methods such as proof-of-signature must still be launched. What is state of the art now will undoubtedly be considered obsolete in short order.