This is a several part summary of the Udemy lesson: Blocchain and Bit coin fundamentals completed with my own research. Welcome to Part 2.

The focus of Part 2 is to review most popular consensus algorithms.

Consensus algortihms allow mutually untrusted, uncoordinated parties to agree on a world readable, distributed list of things: domain names, transactions, title deeds, etc…), something that cryptography makes possible.

Consensus

Proof of Work: POW

With POW based systems like Bitcoins, trust concentrates at the entities that can produce the greatest amount of work.

Python implementation

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'''
POW Distributed Consensus Algorithm
'''
import string
import random
import hashlib

def search(challenge, sz=10):
    """
    create a string as a mixed of letters lower or uppercase and digits
    """
    nonce = "".join(random.choice(string.ascii_lowercase + string.ascii_uppercase + string.digits) for x in range(sz))
    st = challenge + nonce
    st_enc = st.encode("utf-8")
    m.update( st_enc )
    hash_block = m.hexdigest()
    return nonce, hash_block


def pow(challenge, sz):
    m = hashlib.sha256()
    while True:
        nonce, hash_block = search(challenge, sz)
        if hash_block.startswith('0000'):
            print("Nonce {} | Hash Block {}".format(nonce, hash_block))
            break

if __name__ == "__main__":
    challenge = "9K7532jsXGJ8723"
    pow(challenge, sz=10)

Proof of Stake: POS

In POS, miners are called validators. Each validators deposit their money to the blockchain to get the opportunity to validate or sign a block. In POS, the bigger your stake (deposit), the bigger the chance to solve the block.

Here is an example, let’s assume 4 validators, with different statke in the block:

After some random calculation, a validator is picked to solve the problem:

• (1) has 45% chance to be picked to solve the challenge
• whereas (3) has only 16% chance to be picked.

The validators are not awarded with new coins but with transaction fee.

Cons: environmentally friendly, fewer cartels, impossible 51% attacks

Delegated Proof of Stack: DPOS

Trusted Delegates are voted on by the people through approval voting.

Approval voting is a method with only upvotes, no downvotes.

The goal:

• Decentralize Power/Trust
• Prevetn censorship over inclusion of transaction into blocks
• everyone agrees on the same order of events
• apply deterministic state machine to arrive at the consensus state

Requirements characterics of the consensus algorithms:

• what latency is until the 1st confirmation
• what the final latency is

Demo

We assume a set of producers who have been elected and once elected they take turns producing blocks:

(a) Every 3 seconds, a block producer is scheduled to produce a block. There is only 1 block producer who can produce a block at that time. After every block producer is used once, we shuffle them

(b) If something happens, let’s say B node goes down at time 9, then we have no block at that point.

(c) Another possibility is B is build of C and next block is built of C too, and then this block does not propagate to the next producer.

The rule of DPOS is that the longest chain is the consensus chain. That is to say we know where the consensus is because that’s where the majority of the parties are.

This system will work if only one honest block producer is operational . That is because that block producer can support the election that changes the set of producers that elect the new producer until we get back to full speed.

Another Feature: The last irreversible block. It is the block that 2/3 of the other producers have built on top of. So, anything earlier than that block are immutable. That features solves the problem of the long range attacks