Chapter 2

BLOCKCHAIN TYPES AND

CONSENSUS MECHANISM

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Centralized Network
• In centralized systems, only a central
Central authority or administrator has the power to
Server / maintain and update the database.
Authority
• All the data flows are controlled and
managed by the central authority.
• The central authority maintains the database
Nodes by defining the rules and procedures users
can have on adding, deleting, or updating
the data.
• All the nodes (computers and devices)
connected to the network are subject to the
access granted by the central authority.
• In simple words, the central authority makes
all the decisions. A failure at the center
means the collapse of the entire system.
Centralized Network
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 Decentralized Network

• A decentralized system does

not rely on any single
authority and is self-
Nodes
regulated.

• Blockchain technology uses

a decentralized P2P network
Nodes
sharing architecture wherein anyone
the can be a node.
workload

• Every node is equal in the

hierarchy with equal access
to maintain the database.
Decentralized Network
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Distributed Ledger Technology
In Blockchain technology, a distributed ledger is a decentralized ledger of all
the information that is recorded onto the Blockchain by consensus.

One can imagine it to be a database similar to an accounting ledger where

financial transactions are recorded, except that it is not restricted to financial
data. Here a transaction refers to any digital data including text, picture, or
audio files.

Unlike the typical database that is either centrally located in one server or
spread out among several select servers, this database is distributed to all
parties and locations.

It can be accessed by every single member of the Blockchain network, thus

ensuring incorruptibility as malicious changes cannot be made when everyone
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Types of Blockchain

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Types of Blockchain
CONSORTIUM
PUBLIC BLOCKCHAIN PRIVATE BLOCKCHAIN HYBRID BLOCKCHAIN
BLOCKCHAIN

ORGANIZATION
TYPE

Multiple organizations or
Public Single entity or organization Highly regulated enterprise
enterprise
COMMON - Chain of blocks - Peer to peer architecture - Public-key cryptography -
FEATURES - Immutable - Byzantine fault tolerance - Auditable -
Anonymity for public network
Anonymous; but web tracking and Known & trusted Known & trusted members; Private network
USERS
cookies pose a risk to privacy participants participants members, are known within the
private network.
Centralized control of providing
selectively open; relevant
ACCESS open and transparent to all Access fully restricted access, hence privacy and
transparency provided
confidentiality maintained
Decentralized; zero points of Centralized; single point of partially decentralized;
NETWORK TYPE Zero points of failure
failure failure multiple points of failure
Any combination is possible;
Pre-approved participants Pre-approved participants Operations are customizable.
Anyone can read or initiate or
OPERATION can read &/or initiate can read &/or initiate Central authority decides which
receive transactions
transactions transactions transactions can be made public
and which are private
Anyone can be a node and take part Single validator node or Only privileged members of
The public network verifies the
VERIFICATION in the consensus process to validate central authority to create a the consortium can validate
block
transactions and create a block block and create a block
Secured by hashing at the private
Secured by distributed Secured by distributed
IMMUTABILITY Secured by hashing network and secured by distributed
consensus consensus
consensus by the public blockchain
Voting or variations of Voting or variations of
CONSENSUS DPoS in public and variations in
PoW, PoS, etc. PoW/PoS consensus PoW/PoS consensus
MECHANISM private
algorithms algorithms
Users limited to within a
Incentivizes miners to grow the company; hence Can incentivize users in the main
INCENTIVIZATION Limited incentivization
network incentivization is not public network
relevant
Security based on consensus
Security is dependent on the Security is dependent on the
protocols and hash functions. Very high as hackers or unknown
SECURITY blockchain architecture blockchain architecture
Higher the security, lower the parties cannot access the system
adopted adopted
performance
Trust-free system; trust is enforced Trusted; need to trust the Trust-free system; consensus by
TRUST Trusted; central control
via cryptographic proof majority public blockchain

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What is Consensus?
As per Webster dictionary, a consensus is a general agreement or
opinion shared by all the people in a group. A protocol is a system
of standard rules that are acceptable by all parties to control the
exchange of information in a network. Thus, a consensus
protocol in Blockchain can be defined as a set of rules and
procedures for attaining a unified agreement (consensus) between
the participating nodes on the status of the network.
Consensus protocols are the rules that define how the different
actors in a distributed ledger authenticate and validate the
transactions added to it to prevent different versions of the ledger
from being created or previous transactions from being edited.
The consensus protocol aims to overcome the classic problem of a
Blockchain Technology
distributed computing system known as Chandramouli,
the Byzantine Asha, Abhilash, Meena
Generals 7
Byzantine General Problem

Coordinated attack leading to victory Uncoordinated attack leading to defeat

Figure 2.12: Byzantine Generals Problem

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Objectives of Consensus Protocol

1. 2. 3.

Unified Fault Tolerant Collaborative

Agreement and
Participatory

4. 5. 6.

Egalitarian Incentivisation Prevent Double-

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Different Consensus Algorithms

1. Proof of Work (PoW)

2. Proof of Elapsed Time(PoET)
3. Proof of Stake (PoS)
4. Delegated Proof of Stake (DPoS)
5. Proof of Authority (PoA)
6. Practical Byzantine Fault Tolerance
7. RAFT

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Other Consensus Algorithms
1. Proof of Stake Anonymous (PoSA):
2. Leased Proof of Stake (LPoS):
3. Proof of Importance (PoI):
4. Proof of Storage
5. Proof of Burn
6. Proof of Activity
7. Proof of Capacity
8. Directed Acyclic Graph (DAG)

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