Crypto Consensus Models

Currently in the crypto world we have various types of consensus models that essentially gate keep which transactions get added into a block and furthermore onto the block chain.

Landscape

Proof of Work ( PoW)

Made famous by Bitcoin. In this model a node has to perform some work in order to qualify the transaction.

The problem with this system is that it is energy intensive and it favors participants that have the most compute resources in the network.

Proof of State (PoS)

Made famous by Ethereum. In this model an owner with largest amount of value locked up in the coin gets to make decisions on what gets inserted into blocks.

The problem with this system is that it favors those that buy large sums of coins on the platform.

Proof of Activity (PoA)

This is a combination of PoW and PoS in an attempt to cancel out the negatives of both systems above.

The problem with this system is that participants with large resources can likely get ahead in both PoW and PoS will succeed in PoA.

*Proof of Burn (PoB) In this algorithm the network will favor the participant that is willing to simply lose/burn the largest sum of money. The idea here is someone is willing to part with a large sum of cash in the short run to gain an advantageous position in the network to gain in the long term.

The problem with this system is how many people are willing to simply toss a large sum of money into the abyss ( literally unrecoverable ) for a future gain that may never happen.

Delegated Byzantine Fault Tolerance This algorithm designates nodes to take on special roles to coordinate and achieve consensus.

The problem with this system is that it is complex with nodes changing roles and such. Also a special node can be corrupt and get make bad proposals to the rest of the network.

Road Ahead

From looking at these options, I believe we need to pick an algorithm that has the following properties:

• Not High Energy Consumptive.
• Not wasteful
• Does not favor incumbents with large resource outlays
• Should not be easily attackable. All the algorithms are prone to being attacked, however the attack should not be easy to mount or sustain.

At the moment I would dismiss PoW outright due to the environmental damage it causes. A re-examination is necessary if a sustainable energy source becomes a reality.

All things considered I would opt for a PoS but a ceiling on the percentage ( of the total market cap ) one can have to be considered influential. Decision makers could be randomly picked from the pool of participants that have met the percentage cut off. The random selection would hopefully abate attempts by any single participant to tie up decision making. The percentage cut off would also be set so that the majority of the stake is still allocated out to the network as best as possible as another defense to one participant gobbling up too much control.