Exotic consensus algorithms: PoA, DPos and others

PoW and PoS algorithms have become the golden standard for blockchains. We have already covered their fundamental differences. However, some other algorithms have been created to get rid of the shortcomings of classical solutions or to introduce new, more progressive standards for the new generation of cryptocurrencies. Let's consider the alternatives to PoW and PoS consensus mechanisms.

Proof-of-Staked-Authority, Proof-of-Authority (PoA)

This algorithm is becoming increasingly popular among coins that aim at a higher level of scalability. The PoA consensus algorithm relies on the authority of the users that have been approved by the community to act as validators. Validators stake their reputation instead of staking coins (as with PoS). To become a PoA validator, one must have the highest reputation in the community and undergo a KYC-like identity verification procedure. So, they’re motivated to maintain the status that they received. Validators strive to maintain an optimal transaction process to avoid spoiling their own reputation and losing validator status.

PoA is considered a good solution for private blockchains that focus primarily on scalability rather than decentralization.

Projects using PoA include BSC (Binance Smart Chain) other Ethereum sidechains.

Delegated Proof-of-Stake (DPoS)

This is an upgraded version of PoS. The key difference is that the largest “whales” can vote and elect representatives (community members they trust) to be transaction validators. The top representatives (who get the majority of the votes) become transaction validators. Users can delegate their voting rights to other trusted users to vote on their behalf. That's a pretty democratic form of selecting validators, much like parliamentary elections.

DPoS is used by Cardano, Tron, Tezos, EOS, Lisk, Ark, Steemit.

Leased Proof-of-Stake (LPoS)

Traditionally, the PoS algorithm puts all transactions in a pool. Each node validates the block, executes the transactions in the block, and adds the block to the chain. However, with the Leased Proof-of-Stake algorithm, any token holder has the right to lease their stake to a full node. Each time the mining node generates a block, the owner of leased tokens receives passive income (percentage of commission).

LPoS is used by Waves.

Nominated Proof-of-Stake (NPoS)

This algorithm implies the availability of a certain list of “nominators” who will back validators with their own stake and take responsibility over their reputation and performance.

NPoS is used by Polkadot.

Pure Proof-of-Stake (PPoS)

This is a very unusual method of selecting validators. They are selected secretly and randomly among the owners with a minimum required staking amount.

PPoS is used by Algorand.

Effective Proof-of-Stake (EPoS)

The algorithm has a progressive reward distribution mechanism that encourages the creation of a network with a large number of validators that hold a small staking amount instead of a small number of deep-pocketed validators. This approach effectively promotes decentralization.

EPoS is used by Harmony.

Proof-of-Elapsed Time (PoET)

The algorithm is based on a mechanism that prevents excessive use of resources and power consumption. The concept of the algorithm was developed in early 2016 by Intel Corporation. Each network user has to wait for a randomly chosen period, and the first to finish the waiting time finds the new block. Each blockchain node generates a random waiting time and enters into stand-by mode during this period. Whoever “wakes up” first becomes the lucky one who includes the new block in the chain, transferring the necessary information to the whole peer-to-peer network. Then everything repeats over and over.

PoET is used in closed enterprise solutions like Hyperledger.

Proof-of-Importance (Pol)

Proof of importance is a mechanism that selects the “important” nodes, which get the right to add a new block. The nodes with the highest importance score will have a higher probability of being selected for validation.

Pol was introduced by NEM.

Proof-of-Capacity (PoC)

This algorithm uses free space on the HDD, rather than the most powerful equipment (as in PoW) to determine the mining rights.

PoC is used by Burst, Storj,and Signum.

Proof-of-Burn (PoB)

The protocol operates on the principle of granting users the right to generate a new block after they burn some of their coins. The more coins burned, the greater the chances of being rewarded.

PoB is used in Slimcoin, Counterparty, and Factom.