UNIT 2 CONSENSUS 9 Hrs.

Requirements for the consensus protocols, Proof of Work (PoW), Scalability

aspects of Blockchain consensus protocols, Permissioned Blockchains: Design
goals, Consensus protocols for Permissioned Blockchains.

Consensus protocols are essential in distributed systems, particularly in

blockchain technology, where they ensure that all nodes agree on a common value
or sequence of values despite potential failures or malicious behavior.

The requirements for effective consensus protocols generally include several key
properties:

Key Requirements for Consensus Protocols

Agreement: All correct processes must agree on the same value. This ensures
that every participant in the network reaches a uniform decision, which is crucial
for maintaining consistency across the system.

Termination: Every correct process must eventually decide on some value. This
property guarantees that the protocol will not run indefinitely and that all non-
faulty nodes will reach a conclusion.

Integrity (or Validity):

 Weak Validity: For each correct process, its output must be the input of
some correct process. This means that if a process proposes a value, it
should be reflected in the final consensus if it is to be considered valid.

 Strong Validity: If all correct processes propose the same input value, they
must all output that value. This ensures that consensus reflects the actual
inputs when there is unanimous agreement.

 Fault Tolerance: Consensus protocols should be resilient to a certain

number of faulty or malicious processes. For instance, a protocol is termed
t-resilient if it can achieve consensus even when up to t processes fail.

Performance Metrics:

 Latency: The time taken to reach consensus can vary based on network
conditions and the number of nodes involved.
  Throughput: The number of transactions processed in a given time frame
is critical for evaluating efficiency.

 Message Complexity: This refers to the amount of communication

required between nodes during the consensus process, impacting overall
performance.
 Security Considerations: While not always directly part of the consensus
requirements, security against attacks and ensuring data integrity are vital
as they help maintain trust within the network.

Common Consensus Protocols

Several consensus mechanisms are widely used, each with its own strengths and
weaknesses:

 Proof of Work (PoW): Used by Bitcoin, this method requires

computational effort to validate transactions.

 Proof of Stake (PoS): In PoS, validators are chosen based on their stake
in the network rather than computational power.

 Practical Byzantine Fault Tolerance (PBFT): This protocol is designed

to work effectively even in environments where some nodes may act
maliciously or fail.

These requirements and properties are crucial for designing robust consensus
protocols that ensure reliability and integrity in distributed systems, particularly
as they scale and face various operational challenges.

Proof of Work (PoW)

Proof of work is a core mechanism that facilitates Bitcoin transactions. Proof of

Work is a consensus algorithm that enables the network to agree on the order of
transactions and blocks. In other words, it’s a way to make sure that all nodes
(computers on the network) agree with one another. Instead, it used a proof of
stake system, which required participants to have some amount of bitcoin for
them to be able to participate in mining or staking.

In a proof-of-work system, the first node to solve a given problem receives a

reward for its effort. This means that if you have a computer that has access to
resources like electricity and storage space, you can use that resource to mine
cryptocurrency. In this article, you will learn details about proof of work.

Proof of work is a concept in computer science and cryptography whereby a piece

of data must be difficult (or impossible) to produce without the consent of the
person or entity using the data. The proof of work prevents users from creating
alternative chains and thus gaining control over the system. The blockchain
incorporates a public ledger that records transactions on a digital ledger, but
unlike a traditional database, it uses cryptography to ensure data integrity and
prevents tampering with information.

Proof of work is a consensus algorithm that allows the network to agree on the
validity of transactions. For a transaction in the blockchain, it must be validated
by the network. This can be done using several different ways. Proof of Work
(PoW) is the first and most popular method. In this method, miners compete with
each other to solve complex mathematical problems to validate transactions. If a
miner solves these problems quickly enough, they will be rewarded with newly
created Bitcoins and added to the blockchain.

Thrashing is another way in which you can help validate transactions on the
Bitcoin network. It involves running your computer fully but not doing anything
useful (for example, downloading large files or playing games). Running thrash
cycles helps ensure that all blocks are mined before they can be filled with data
as part of a block reward or transaction fee payment. Proof of Stake (PoS) is
another consensus algorithm that has gained popularity over time. Rather than
mining blocks and validating transactions, users stake their coins to gain rewards
from participating in the network’s consensus process.

Innovation of Proof of Work

The innovation of Proof of Work, proposed by Markus Jakobsson and Ari Juels
in 1999, has been one of the most critical developments in cryptocurrency. It is a
new way to verify transactions in a distributed network. The original idea was to
create a system that would be implemented on top of existing P2P networks.
Markus Jakobsson and Ari Juels, in 1999, used a combination of hashing and
proof-of-work to achieve a distributed consensus among nodes about the order of
transactions. The scheme was called “Proof-of-Work” (PoW).

It started with the idea that a transaction verification process should be as

decentralized as possible. This means that every participant should be able to
verify transactions efficiently without having access to any centralized database.
The concept was later refined and implemented on top of the Bitcoin network,
where it became known as block mining. The PoW scheme is called Proof-of-
Work because Bitcoin miners need to solve an expensive mathematical puzzle
before adding the transaction to the blockchain and earning themselves a reward.
The puzzle is designed to take a large amount of computational power to solve,
making it hard for a single entity to control the network’s mining process. This
prevents one entity from gaining a majority over the hashing power and censoring
transactions.

The system is also designed so that blocks cannot be added until they are signed
by many users, preventing one entity from gaining too much control over the
system. The original idea behind the proof of work scheme was to provide a way
for miners to avoid centralization. The proof of work scheme is designed such
that any miner can generate a block, but only the first miner to solve the problem
gets a reward. This system creates a computational requirement for new blocks,
called the proof of work, or PoW.

The problem is challenging because it requires programmable computers with

large amounts of memory to run through all possible input combinations until one
finds the correct answer. The first person who can solve this algorithm gets
rewarded for their efforts and enters a lottery where they can claim some coins as
payment. The more computing power you have at your disposal, your chances of
winning the lottery are higher!

Purpose of Proof of Work(POW)

The purpose of proof of work (POW) is to achieve consensus in a distributed

system. Consensus is the state where all participants agree on a single value. In a
system with POW, if one party does not agree with the majority, it will not be
able to reach a consensus and, therefore, cannot reach a consensus on the value
being verified. This prevents the problem of one person having a majority hash,
which would allow them to block other nodes from reaching consensus.

The idea is that the miner who solves a block first gets to add it to the blockchain
and get paid some reward for doing so, but if multiple miners are trying to solve
blocks at the same time, then one of them will win and be able to create another
block on top of theirs (and claim their reward). This problem can be solved by
forcing all miners to compete with each other for each new block created, which
requires solving a complicated math problem with high levels of randomness
involved.

All nodes on the network must validate the block before it is added to the chain;
this ensures no one person controls more than 51% of hashing power on any given
network and that no group or entity has centralized control over the network or
can manipulate it for their benefit (note: Bitcoin uses Proof-of-Work instead of
Proof-of-Stake).

Mechanism of Proof of Work

Figure 1. Mechanism of Proof of Work

The mechanism of Proof of Work (PoW) is an essential topic in the world of

cryptocurrencies. The concept of PoW is that a computer has to expend work to
validate a block. This validation process is performed by solving a problem
requiring computers to solve math problems.

The problem is called the hash function, which takes user input and outputs many
numbers. Other computers on the network verify the output. This verification
process is known as mining, and it takes place when users choose to mine for
cryptocurrency or participate in the network.

The idea behind POW was that miners would be incentivized to verify blocks
because they’d receive new coins. However, this hasn’t happened because no
incentives haven’t been built into Bitcoin’s design. In simple terms, miners solve
complex mathematical problems called ‘blocks’ to add them to the blockchain.
When they solve these blocks, they are rewarded with new bitcoins. This is done
through POW mining.
Now that there are millions of transactions every minute, miners have become
more specialized than ever, with only large mining pools providing security
against 51% of attacks on the network. Proof of Work (PoW) is a distributed
consensus algorithm that makes it difficult to fake or reverse engineer the history
of a transaction. It also makes it expensive to attack the network.

Proof of work is a consensus algorithm used in cryptocurrencies to verify the

legitimacy of an arbitrary number of transactions. It works by having a vast
network of participants (miners) do work to find an inappropriate number (hence
“proof”) for a block of transactions called a nonce. The miner who solves the
proof receives a reward in the form of cryptocurrency.

The primary purpose of proof of work is to ensure that no one can cheat the
system by making any extra blocks. This prevents double spending by allowing
only one piece of data per block. The secondary purpose is also to ensure that
anyone attempting to hack the system cannot simply rewrite all past blocks as
new ones since they would not receive any reward for doing so.

The mechanism behind proof of work takes advantage of what is known as

“hashing functions”, where given some input, it returns an output with some fixed
length and structure. In this way, it is easy to check if two pieces of data are equal
(and therefore not an accident) but hard to modify them without changing their
hash value or breaking the system entirely.

Benefits of Proof of Work(POW)

Figure 2. Benefits of Proof of Work

Proof of Work(POW) is a consensus algorithm requiring participants to solve a
computationally-intensive problem before they are allowed to participate in the
network. This ensures that only participants with real computational power can
participate and make decisions.

The benefits of Proof of Work(POW) include the following:

 No Single Point of Failure

The main benefit of POW is that it is not vulnerable to any single point of failure.
This means that the system cannot be hacked or attacked by any individual, group,
or entity. The security of each node in the network is guaranteed by the work done
by all other nodes. There is no need for any central authority to manage and
maintain the system. POW is a decentralized mining system, which means that if
one machine goes offline, the network will still be able to process transactions.
This is unlike other Proof-of-Stake (PoS) cryptocurrencies, where the network
would stop working if one node went offline.

The most crucial benefit of POW is that it allows you to build a system that works
even if one or more computers fail. For example, the new computer can still run
if one computer crashes and another takes over. This means that a blockchain is
not vulnerable to a single point of failure like traditional databases are.

 Secure
The main advantage of Proof of Work(POW) is that it offers complete security
and privacy protection to users from various threats such as hacking, theft, or data
loss. A hash algorithm has been used for generating blocks and verifying
transactions on a blockchain network. In other words, users can send bitcoins
without worrying about getting them stolen or lost forever. The miners who
validate transactions on the blockchain are the only ones who get rewarded with
new coins.

Since they can’t cheat or steal your coins, you are safe from hackers who might
try to steal your coins by hacking through your wallet software or exploiting bugs
in your CPU/GPU. A blockchain has no central server that can be hacked and
taken down. This makes it much more secure than databases because there is no
central point where all information is stored. If someone hacks into the database
server, they still have access to all data stored on it as long as they don’t delete
any files or corrupt them somehow. With a blockchain, if someone hacks into one
node, they won’t be able to access information from anywhere else connected to
it.
  Instantaneous Transactions
The main benefit of Proof of Work(POW) is that it allows instant transactions
between parties without requiring third parties like banks or governments to
facilitate such transactions. Users can directly transfer money from one party to
another without involving any third party. Another benefit of using POW instead
of SQLite (or some other database) is that transactions are processed
instantaneously. This means that you don’t need to wait for your transaction to
go through before doing anything else, and it also allows you to process
transactions faster because they’re not waiting on each other. It does not require
anyone to trust any centralized entity with their money or information. It also
provides instant transactions instead of waiting days for confirmation before
spending your funds.

 Energy Efficient
Blockchains are energy efficient because they use a proof-of-work (POW)
mechanism to validate transactions. This mechanism requires miners to expend
computing power for the Proof of Work (PoW) algorithm, which is why Bitcoin
and Ethereum have such high fees. POW is also known as “mining.” PoW is
energy efficient because it does not require any special hardware and does not
need special software. It runs on many computers at the same time. It is more
decentralized than other consensus algorithms, such as Proof of Authority (PoA).

 Cost Effective
In PoW, miners compete with each other to solve complicated mathematical
problems. The first miner to solve it gets rewarded with the block reward and
transaction fees from the new block. This incentivizes miners to expend more
computing power on the network, making it more secure for users. It is cost-
effective because you can use your computer’s processing power to solve
problems instead of buying expensive hardware or renting servers from third
parties. You can also use your idle computer’s resources to mine cryptocurrencies
without paying electricity bills or renting servers from third parties.

Relation Between Proof of Work and Blockchain

The idea behind proof of work is that miners compete against each other to solve
complex math problems, add new blocks to the blockchain network, and receive
bitcoins as payment or rewards for their efforts. Proof of work and blockchain are
different things. Blockchain is the underlying technology for cryptocurrencies
like Bitcoin, Ethereum, and Litecoin. Proof of work is a system that aims to
ensure that the community verifies blocks of data in a distributed ledger system.

There are multiple ways to carry out the proof-of-work mining process. Still, they
all involve solving a mathematical problem that anyone can verify using
computers or smartphones running specialized software called miners. Proof of
work (PoW) is a method for securing a cryptocurrency network and achieving
distributed consensus by requesting users to produce computational results. The
most common use of PoW is to protect the integrity of the blockchain, but it can
also be used to create digital currencies.

To do this, miners solve complex mathematical puzzles that are difficult to solve
by ordinary users. They are rewarded with new coins for their work. The first
miner to solve the puzzle receives newly created coins; everyone else who
participated in the process also gets a share of those coins. This method has been
used in Bitcoin and other cryptocurrencies since they were created.

Proof of Work systems requires users to spend computational power on solving

complex mathematical problems to create new blocks on a blockchain network.
This is done by miners who verify transactions and create new blocks on the
blockchain network. The verification process involves solving an algorithm that
combines previous block hashes with the block header hash, where one hash must
match another before it can be added to the chain.

The Proof of Work (PoW) algorithm is a consensus mechanism that depends on

the expenditure of computing power to produce a result. This is in contrast to the
Proof of Stake (PoS) protocol which depends on the possession of tokens. It is
used to show how Proof of Work can be used as an incentive mechanism for
miners to ensure that all nodes maintain finality and reach a consensus on the
state of a blockchain network. Proof of work algorithms is used in
cryptocurrencies such as Bitcoin. They weren’t initially designed for this purpose,
however. The original idea behind proof of work was to stop miners from
colluding to mine blocks faster than everyone else using a single computer.

Example of Proof of Work

Let’s consider an example involving a miner named Harry who wants

to add his block of Bitcoin transactions to the blockchain:
 Block Hash: 817de9e0c
 Difficulty Hash: 001000000
 Nonce: 8263

In this scenario, Harry needs to find a nonce that results in a block hash
that begins with several leading zeros (as specified by the difficulty
target).
Initially, his hash does not meet this requirement:
Block Hash = 817de9e0c
Difficulty Hash=001000000
Since 817de9e0c > 001000000

Harry's current nonce does not produce a valid hash. He continues

modifying the nonce until he finds a combination that yields a valid
hash:
1. Harry increments his nonce value.
2. After several attempts, he finds that changing his nonce to 8265
results in:

New Block Hash=000abc123

Now, since 000abc123<001000000000, Harry has successfully created
a valid block and can broadcast it to the network for verification.

Scalability aspects of Blockchain consensus protocols

Scalability is a critical challenge in blockchain technology, primarily influenced

by the consensus protocols employed. These protocols are essential for
maintaining the integrity and security of transactions but often struggle to keep
pace with increasing transaction volumes. Here are the key aspects of scalability
concerning blockchain consensus mechanisms:

Scalability Challenges
 Transaction Throughput: Traditional consensus mechanisms like Proof
of Work (PoW) limit transaction throughput due to their resource-intensive
nature. For instance, Bitcoin can process only about 7 to 10 transactions
per second (TPS), significantly lower than centralized systems like Visa,
which can handle thousands of TPS. This limitation leads to network
congestion, increased transaction confirmation times, and higher fees as
user demand grows.
 Network Latency: As the number of nodes in a blockchain increases, the
time required for nodes to reach consensus also rises. This latency can
hinder performance and affect user experience, particularly in public
blockchains where every node must validate transactions.
 The growing size of the blockchain can pose challenges for nodes that need
to maintain a full copy of the ledger. As more transactions are added, the
storage requirements increase, making it difficult for new nodes to join and
participate in the network.
Consensus Mechanisms and Their Scalability

 Proof of Work (PoW): While PoW is known for its robust security, it
suffers from significant scalability issues due to its high computational
requirements and slow transaction processing speeds. The energy
consumption associated with PoW also raises concerns about
sustainability.
 Proof of Stake (PoS): PoS addresses some scalability issues by allowing
validators to be chosen based on their stake in the network rather than
requiring them to solve complex mathematical problems. This leads to
faster transaction processing and lower energy consumption compared to
PoW. Ethereum's transition from PoW to PoS is a prominent example of
this shift aimed at enhancing scalability without compromising security.
 Delegated Proof of Stake (DPoS): DPoS further improves scalability by
allowing token holders to elect a limited number of trusted nodes
(delegates) to validate transactions. This reduces the number of participants
involved in consensus, leading to quicker transaction confirmations and
higher throughput.
 Proof of Authority (PoA): In PoA systems, only selected nodes are
allowed to validate transactions based on their reputation. This method can
significantly enhance scalability as it limits the number of validators
involved in each transaction, thereby speeding up the process.
 Byzantine Fault Tolerance (BFT): BFT protocols aim to achieve
consensus even when some nodes fail or act maliciously. While they can
improve resilience and security, they may introduce additional complexity
that can affect scalability as the network grows.

But, before we consider a viable enterprise blockchain solution, we need to

address a key issue:

Figure 3. Key Issues

Innovative Solutions for Scalability

 Sharding: Sharding involves breaking down the blockchain into smaller,
manageable pieces called shards that can be processed concurrently by
 different nodes. This parallel processing significantly enhances transaction
throughput and reduces latency.
 Layer 2 Solutions: These solutions operate on top of existing blockchains
to facilitate faster transactions without congesting the main chain.
Technologies such as state channels and sidechains help alleviate
scalability issues by offloading some transactions from the main
blockchain.
 Hybrid Approaches: Combining various consensus mechanisms or
integrating Layer 1 and Layer 2 solutions can create more scalable systems.
For example, some networks utilize both sharding and PoS or DPoS to
optimize performance while maintaining security and decentralization.
 Interoperability Solutions: Protocols like Polkadot and Cosmos facilitate
communication between different blockchains, allowing them to share
resources and enhance overall capacity without compromising individual
network performance.

NEC’s enterprise blockchain solution has been specifically developed to meet

scalability needs, while also ensuring security and privacy. What NEC has been
able to achieve is beyond mere transaction speed to secure asset transfer. The
consensus protocol leverages ”satellite chains” to allow different consensus
protocols to run independently, in parallel.

This definitely takes care of the scalability challenge that current solutions have
been unable to overcome.

Figure 4. Scalability in NEC’s Blockchain

How this solution works is that the satellite chains are interconnected but function
independently as part of a single blockchain system. Each satellite chain of the
blockchain network has its own private ledger, which prevents any node that is
not part of the satellite chain from accessing any transaction in its ledger.
Scalability is ensured because there is no limit to the number of active chains at
any given point in time, while different chains can run different consensus
protocols, simultaneously.

Apart from the unparalleled scalability that this solution offers, it also allows the
transfer of assets between satellite chains, without compromising on security,
privacy or decentralization. It permits lightweight private sharing, separates
agreement from execution and has a simple failure detection mechanism.

The scalability of blockchain networks is heavily influenced by their consensus

protocols, which must balance efficiency with security and decentralization—a
challenge often referred to as the "blockchain trilemma." As blockchain
technology continues to evolve, innovative consensus mechanisms and strategies
will play a crucial role in addressing these scalability challenges, enabling
broader adoption and functionality across various applications.

Permissioned Blockchains

A permissioned blockchain is a type of distributed ledger technology that restricts

access to the network, allowing only authorized entities to participate and view
data. Unlike permissionless blockchains, where anyone can join and access the
network, permissioned blockchains are controlled environments designed for
specific use cases that require enhanced security, privacy, and governance.

Figure 5. Permissioned Blockchain

Key characteristics of permissioned blockchains include:

 Access Control: Only users with explicit permission can access the
network. This is typically enforced through digital certificates or
cryptographic keys, ensuring that all participants are known and trusted.
  Centralized Governance: Governance is managed by a consortium of
trusted participants who collectively establish network rules, consensus
mechanisms, and operational guidelines. This centralized approach allows
for quicker decision-making and streamlined processes.
 Identity Management: Participants must verify their identities to join the
network. This feature enhances security by ensuring that only authenticated
users can engage in transactions or access sensitive data.
 Data Privacy: Permissioned blockchains allow for selective visibility of
data, meaning that only authorized participants can view certain
information. This is particularly important in industries such as finance and
healthcare, where confidentiality is critical.

Use Cases
Permissioned blockchains are particularly beneficial in sectors where
security, privacy, and regulatory compliance are paramount. Here are some
notable applications:

 Finance and Banking: Financial institutions leverage permissioned

blockchains for secure cross-border transactions, trade finance, and
identity verification. The controlled environment enhances security while
streamlining processes.
 Government Applications: Governments utilize permissioned
blockchains for secure electronic voting systems and identity verification
processes. These applications help reduce fraud and enhance transparency
in public services.
 Supply Chain Management: Companies implement permissioned
blockchains to improve traceability and transparency in supply chains. By
providing an immutable record of transactions, businesses can verify
product authenticity and streamline logistics.
 Healthcare: Permissioned blockchains are used to securely store and share
patient records while ensuring compliance with regulations like HIPAA.
They facilitate interoperability among healthcare providers, improving
patient care coordination.

Challenges

Despite their advantages, permissioned blockchains face challenges:

 Centralization Concerns: The centralized governance structure may lead

to power concentration among a few entities, potentially undermining the
decentralized ethos of blockchain technology.
  Limited Accessibility: The restriction on participation can limit
innovation and collaboration opportunities that are often found in more
open blockchain ecosystems.

In summary, permissioned blockchains offer enhanced security, privacy, and

efficiency tailored to specific industry needs while also presenting unique
challenges related to centralization and accessibility.

Design Goals for Permissioned Blockchains

When designing permissioned blockchains, several key goals are prioritized to

ensure that the system meets the specific needs of its intended users while
leveraging the advantages of blockchain technology. Here are the primary design
goals:

1. Enhanced Security

Access Control: Implement strict access controls to ensure that only authorized
participants can join and interact with the network. This is typically achieved
through identity verification mechanisms such as digital certificates or
cryptographic keys.
Data Privacy: Maintain a controlled degree of transparency, allowing
organizations to restrict access to sensitive information based on user roles. This
is crucial in industries like finance and healthcare, where data privacy is
paramount.
Data Encryption: Utilize robust encryption methods to protect data during
transmission and storage, safeguarding against unauthorized access and cyber
threats.

2. Scalability and Performance

Efficient Consensus Mechanisms: Design consensus algorithms that are less

resource-intensive than those used in permissionless blockchains. Mechanisms
like Practical Byzantine Fault Tolerance (PBFT) or Proof of Authority (PoA)
allow for faster transaction processing and higher throughput due to fewer nodes
being involved in consensus.
Modular Architecture: Implement a modular consensus approach that allows
for flexibility in switching between different consensus algorithms without
altering the underlying infrastructure. This adaptability can enhance scalability as
the network grows.
3. Customization and Flexibility

Tailored Solutions: Enable organizations to customize their permissioned

blockchains to meet specific operational needs and regulatory requirements. This
includes defining roles, permissions, and governance structures that align with
organizational goals.
Adaptability: Ensure that the blockchain can evolve over time to accommodate
changing business requirements or regulatory landscapes without requiring a
complete overhaul of the system.

4. Governance and Accountability

Centralized Governance Structure: Establish a clear governance model that

defines how decisions are made within the network. This often involves a
consortium of trusted entities that collaboratively manage the blockchain's rules
and operations.
Auditability and Transparency: Maintain an immutable record of transactions
that allows for easy auditing while controlling who can view sensitive data. This
promotes accountability among participants without compromising
confidentiality.

5. Interoperability

Integration with Existing Systems: Design permissioned blockchains to easily

integrate with existing enterprise systems and other blockchains. This
interoperability can facilitate data sharing across different platforms while
maintaining security and privacy.
Compliance with Standards: Ensure that the blockchain adheres to industry-
specific regulations and standards, which is particularly important in sectors like
finance and healthcare where compliance is critical.

The design goals for permissioned blockchains focus on enhancing security,

scalability, customization, governance, and interoperability. By addressing these
objectives, organizations can create robust blockchain solutions tailored to their
specific needs while leveraging the inherent advantages of distributed ledger
technology.

Consensus protocols for Permissioned Blockchains

Permissioned blockchains utilize specialized consensus protocols tailored to their

unique requirements, such as enhanced security, efficiency, and controlled
access. Here are some of the most prominent consensus mechanisms employed
in permissioned blockchain networks:
1. Practical Byzantine Fault Tolerance (PBFT)

Overview: PBFT is one of the most widely used consensus algorithms in

permissioned blockchains. It allows a network to reach consensus even if some
nodes fail or act maliciously, provided that a sufficient number of nodes (typically
more than two-thirds) behave correctly.

Operation: In PBFT, nodes communicate in rounds, where each round consists

of several phases: proposal, pre-vote, and pre-commit. Nodes propose a block,
gather votes from other nodes, and commit the block once a supermajority is
reached. This method ensures data integrity and fault tolerance while maintaining
low latency.
Use Cases: PBFT is often used in applications requiring high transaction
throughput and low latency, such as financial services and supply chain
management.

2. Federated Byzantine Agreement (FBA)

Overview: FBA is a decentralized consensus mechanism where each node selects

a set of trusted nodes (quorum slices) to reach consensus. This design allows for
flexibility in node participation and enhances fault tolerance.

Operation: Nodes communicate with their quorum slices to agree on the state of
the blockchain. The state is determined when enough slices reach consensus,
allowing for efficient decision-making even in the presence of faulty nodes.

Use Cases: R3 Corda is a notable example that employs FBA for its permissioned
blockchain framework, making it suitable for enterprise applications where trust
among participants is critical.

3. Istanbul Byzantine Fault Tolerance (IBFT)

Overview: IBFT is another variant of Byzantine Fault Tolerance designed

specifically for private blockchain networks. It focuses on providing fast
transaction finality while ensuring security against malicious actors.

Operation: In IBFT, there are two types of entities: proposers and validators.
Proposers create blocks by gathering transactions from the pool and broadcasting
them to validators, who then vote on the validity of the block. A block is added
to the blockchain once it receives approval from more than two-thirds of
validators.
Use Cases: IBFT is suitable for scenarios requiring quick consensus and high
throughput, making it applicable in sectors like finance and logistics.

4. Round-Robin Consensus

Overview: This mechanism involves selecting nodes in a round-robin fashion to

propose blocks or validate transactions. It distributes responsibilities evenly
among participating nodes.

Operation: Nodes are selected pseudo-randomly to create blocks, ensuring that

no single node has undue influence over the consensus process. After a node
proposes a block, it must wait through a cooling-off period before participating
again.

Use Cases: Round-robin consensus is effective in environments with a limited

number of trusted nodes and can enhance security by mitigating risks associated
with centralization.

5. Federated Consensus

Overview: Similar to FBA, federated consensus relies on a group of trusted

validators to achieve agreement on transactions. This model simplifies the
consensus process while ensuring safety and liveness.

Operation: A designated block generator collects transactions and filters them

before sending them to signers for validation. Once enough signatures are
gathered from trusted validators, the block is published to the network.

Use Cases: This method is particularly useful for applications like cross-border
remittances and real-time KYC processes due to its efficiency and simplicity.

Permissioned blockchains leverage various consensus protocols tailored to their

operational needs, focusing on security, efficiency, and governance. Each
protocol has its strengths and weaknesses, making it essential for organizations
to choose the right one based on their specific use cases and requirements.