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Introduction to Consensus techniques
This document discusses different consensus mechanisms for distributed ledger technologies, including blockchain. It provides examples of proof-of-work (PoW), proof-of-stake (PoS), Byzantine fault tolerance (BFT), federated, and crypto-based consensus approaches. The document examines the properties of each, such as requirements, scalability, transaction finality, and decentralization. It questions whether consensus protocols and distributed shared ledgers are always needed, suggesting alternative approaches based on smart contracts and identity management without a shared ledger may be more efficient.
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Introduction to Consensus techniques
- 1. www.luxoft.com The Blockchain land: Isthere Consensus over Consensus? Vasily Suvorov, VP Technology Strategy March 18, 2016
- 2. www.luxoft.com 2 Can wetalk about blockchain without the Hype?
- 3. www.luxoft.com What is DistributedLedger Technology? (AKA Blockchain) Decentralized Data-Sharing Technology that: Connects participants in a business ecosystem without a central entity or intermediary Maintains real-time, add-only, unchangeable ledger and history of transactions Automates business rules execution Made possible by a unique combination of Peer-to-peer communications, Strong encryption, Distributed consensus and Smart contracts
- 4. www.luxoft.com 4 Consensus isthe most fundamental part of the DLT/Blockchain tech and yet poorly understood
- 5. www.luxoft.com What I’ll cover •What is consensus? • Examples of consensus mechanisms • PoW, PoS, Byzantine, Federated and Crypto-Based • The Big Question • Do we need Consensus Protocols and Distributed Shared Ledgers? 5
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- 7. www.luxoft.com Back to SchoolTime! Byzantine Agreement Protocol. In a synchronous network, let P be a n-player protocol, whose player set is common knowledge among the players, t a positive integer such that n ≥ 2t + 1. We say that P is an arbitrary-value (respectively, binary) (n, t)-Byzantine agreement protocol with soundness σ ∈ (0, 1) if, for every set of values V not containing the special symbol ⊥ (respectively, for V = {0, 1}), in an execution in which at most t of the players are malicious and in which every player i starts with an initial value vi ∈ V , every honest player j halts with probability 1, outputting a value outi ∈ V ∪{⊥} so as to satisfy, with probability at least σ, the following two conditions: 1. Agreement: There exists out ∈ V ∪ {⊥} such that outi = out for all honest players i. 2. Consistency: if, for some value v ∈ V , vi = v for all honest players, then out = v. 7
- 8. www.luxoft.com Let’s Use PicturesInstead! 8
- 9. www.luxoft.com PoW – Consensusfor a Censorship Resistant Network 9 • Ideal for Trustless Environments • Requires Cryptocurrency • Needs cheap electricity • Relies on Game Theory to align incentives • Highly scalable • Slow by design • Transaction finality is not immediate • Favors infrequent, high-value operations • Difficult to upgrade • Privacy? • Decentralization?
- 10. www.luxoft.com PoS – ScalableConsensus for Public & Private Ledgers 10 • Good for Low-Trust Environments • Requires Cryptocurrency • Relies on Complex Rules to align incentives • Highly scalable • Theoretically faster than PoW • Transaction finality is not immediate • Builds foundation for Governance • Microtransactions? • Privacy? • Decentralization?
- 11. www.luxoft.com BFT/Federated – FastConsensus with Finality 11 • Requires higher level of trust / identity • Does not require a Cryptocurrency • Relies on multiple voting rounds • Scalability is limited • Faster than PoW or PoS • Transaction finality is immediate • Easy to govern and upgrade • Privacy?
- 12. www.luxoft.com Identity/Crypto-Based – DistributedLedgers without a Ledger 12 • Requires a way to manage identities • Does not require a Cryptocurrency • Does not require a shared Ledger • Relies on Smart Contracts & Message Routing • Scalability is high • Fast • Transaction finality is immediate • Easy to govern and upgrade • Highest level of privacy
- 13. www.luxoft.com Consensus techniques –Overview 13 Network Size Throughput < 100 tx/s High Latency > 10K tx/s Network Latency < 20 nodes > 1000 nodes Stellar / Ripple IOTA Ethereum PoW Bitcoin POW Kadena Tendermint Symbiont Ethereum PoS*
- 14. www.luxoft.com Next Gen, DecentralizedEDI Technology Making Smart Contracts Enforceable and Data Private • No Single Blockchain or DLT • History is maintained by Nodes, Flow(s) manage relationships between nodes • Histories can be connected, if deals are related • Notary & Oracle Services are defined • Sophisticated Identity Services • Smart Contracts iterate over state • Business process (Flow) updates a state • State transition (input > output) is logged • Multiple Fin related classes are pre-defined • Business prose (PDF) is attached • Consensus is pluggable • Notaries can be validating or not • Notaries can run a BFT or CFT (Raft) protocol • Notaries can be regional or global (Network Map) Party A Party B Notary Oracle Flow Flow Flow Flow Corda – network of Ledgers
- 15. www.luxoft.com Blockchains are inefficient databases! TheBig Question! Shall we just go with distributed, crypto based ”Smart Contracts” ?
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