Consensus alternatives

A consensus mechanism is the root of transactions of Bitcoins; the mechanism used in Bitcoins is based on proof-of-work, using an SHA256 algorithm. Since the consensus mechanism requires the mining of blocks, it became very computation-intensive, leading to the creation of specified Application-Specific Integrated Circuit Chips (ASICs), which are Bitcoin-mining hardware created specifically to solve Bitcoin blocks.

This led to the creation of Altcoins with innovative algorithms such as these:

  • Scrypt: This is widely used in Litecoins, Dogecoin, and so on
  • Scrypt - N: This is used in vertcoin, Execoin, and so on
  • Skein: This is used in DigiByte, Myraid, and so on
  • Groestl: This is used in Groestlcoin, securecoin, and so on
  • SHA3: This is used in Maxcoin, Slothcoin, and so on
  • X11: This is used in Dash, CannabisCoin, and so on
  • Blake: This is used in Netko, Trumpcoin, and so on
  • X13: This is used in Navcoin, Cloakcoin, and so on
  • CryptoNight: This is used in Monero, Bytecoin, and so on
  • QuBit: This is used in Geocoin, DGB-Qubit, and so on
  • Dagger Hashimoto: This is used in Ethereum, Ethereum Classic, and so on
  • Lyra2RE: This is used in Verge, Zcoin, and so on
  • X15: This is EverGreenCoin, Kobocoin, and so on

Apart from innovative algorithms, there are also a lot of innovative consensus types commonly known as proof types, being used, such as these:

  • Proof of Work (PoW): This is the most commonly used proof type; in this proof type, the calculations are required by the network node to form the ledger by the process of mining.
  • Proof of Stake (PoS): This was first used in Peercoin. With Proof of Stake, instead of mining a node stakes (holds) coins and validates ownership. A new block creator is predicted by using algorithms by searching for the lowest hash value combined with the size of the stake. The nodes can predict which stake will create the next block. No mining is required in this type of system.
  • Proof of Stake Anonymous (PoSA): This is a variation of the POS algorithm, first introduced in Cloakcoin; with Proof of Stake, the transactions are cloaked by other nodes that receive a reward for helping in the process. The nodes provide inputs and outputs to the transaction, making it impossible to figure out the destination or the source of the specified transaction.
  • Delegated Proof of Stake (DPoS): With delegated proof of stake, users act as delegates who are given power to earn from running a full node of the blockchain. Bitshares introduced this type of proof; some more coins using it are Steem, EOS, Lisk, and so on. 
  • Proof of Importance (POI): With Proof of Importance, every account on the Blockchain is given an importance score; this score influences how each node can harvest the blockchain. The task of the harvesters on the blockchain is to add transactions on the blockchain in exchange for a small economic incentive. As the importance score increases, the chance of getting the rewards also increases.
  • Proof of Capacity or Proof of Space (PoSpace): In this type of proof, instead of using blockchain, storage is used. This type is considered an economical and greener alternative due to the general-purpose nature of storage and the cheaper energy cost required by storage. Some of the theoretical and practical implementations of PoC are Burstcoin, SpaceMint, and others.
  • Proof of Stake Time (PoST): In this approach, consensus is formed by introducing a stake-time component, wherein the stake increases over time. This provides an incentive staking process and boosts the security of the network. The goal of this type of proof is to avoid common Proof-of-Stake methods, where nodes with higher numbers of coins used to get more economic incentives. 
  • Proof of Stake Velocity (PoSV): In this method, rewards are distributed based on how many coins a node has and how actively the transactions happen on the node.
  • Proof of Activity (POA): In this proof type, a hybrid approach is followed, combining Proof of Work with a Proof of stake-based system. In this system, mining occurs just like in PoW systems. Although the blocks mined do not contain any transactions, only header and the miner's reward address. Then, the system switches to PoS, where a random group of validators are chosen; the block then becomes a fully fledged block as soon as all validators sign it.
  • Proof of Burn (PoB): In this proof, we have to prove that coins are burned in the process of sending a transaction to an address that is undependable. Although this only works with coins mined from PoW currencies. In short, coins are bootstrapped by destroying the value of another PoW coin.

Due to the large amount of Altcoins and larger number of coins being released regularly, it is important to know about the differences each of the coins offers. It is now time to discuss various Altcoins and what each one of them offers.

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