<aside> đź’ˇ Cardano chain makes use of Proof of Stake (PoS) consensus mechanism as opposed to the energy-intensive Proof of Work (PoW). That makes Cardano chain more energy-saving and sustainable than the chains operated by PoW consensus mechanism.
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The consensus mechanism is the algorithm of the blockchain to verify transactions, add transactions to the blockchain, and create new tokens. In anonymous setting, the consensus algorithm is the essence of the blockchain to secure chain from the malicious hackers. Each blockchain applies different consensus mechanism including Proof of Work (PoW), Proof of Stake (PoS), Proof of History (PoH), Proof of Authority (PoA), Proof of Capacity, Proof of Activity, Proof of Elapsed Time (PoET), and so on. Among them, PoW and PoS are the major two consensus algorithms applied by the blockchains. Each of them is explained below.
👉 Different types of consensus mechanism is summarized in Consensus Mechanism of Blockchain.
Proof of Work (PoW) is the consensus mechanism in which virtual miners around the world compete to be the first one to solve a time-consuming math puzzle. To add transactions to the blockchain, all miners do computations to solve a math puzzle. Hence, the total amount of energy used by miners becomes huge in PoW consensus mechanism. That is one of the reasons why blockchain is said “environmentally unfriendly technology.” The winner of the miner updates the blockchain with the lastly verified transactions. The predetermined amount of crypto is sent to the winner as a reward. The examples of chains that apply PoW consensus mechanism are Bitcoin and Ethereum.
Proof of Stake (PoS) is another consensus mechanism in which invested participants called validators stake their valuable assets to secure the network and verify transactions. The winner is selected randomly in proportional to the amount of valuable assets staked on the chain. After the winner validates the latest transactions, other participants can check if the validation by the winner is accurate. Once certain number of participants agree with the winner’s validation, the transactions are included in the blockchain. Compared to PoW consensus mechanism where all miners do computations to solve a time-consuming math problem, in PoS consensus mechanism, on the other hand, only the winner validates the transaction and the certain number of validators do confirmation of the winner’s verification. Hence, the total amount of energy used by participants are much less than PoW mechanism. The examples of chains that employs PoS consensus mechanism are Cardano, Tezos, Polkadot, and Avalanche.
👉 More about Cardano’s Ouroboros PoS consensus mechanism is explained in Ch.2.1. Consensus Mechanism: Ouroboros.
Consensus Mechanism of Blockchain
đź”— https://www.coinbase.com/learn/crypto-basics/what-is-cardano
Table 1 below shows the list of chain and its applied consensus mechanism. The chain is listed in the order of the start date of the chain so that it is easy to follow the development of the chains in the historical order. Some additional explanations are in the column “Note.”
Table 1. List of Chain and Its Consensus Mechanism
| Chain | Start Date | Public / Private | Consensus Mechanism | Type | Note |
|---|---|---|---|---|---|
| Bitcoin | 01/03/2009 | Public | Nakamoto consensus | PoW | Combination of PoW and longest chain rule |
| Litecoin | 10/08/2011 | Private | Nakamoto consensus | PoW | Bitcoin fork |
| Ethereum | 07/30/2015 | Public | Nakamoto consensus | PoW | In the process of switching to PoS (the “Merge”) |
| Bitcoin Cash | 08/01/2017 | - | Nakamoto consensus | PoW | Bitcoin fork |
| Cardano | 09/23/2017 | Public | Ouroboros | PoS | Founded by a co-founder of Ethereum, Charles Hoskinson |
| Tron | 06/24/2018 | Public | Delegated Proof of Stake | PoS | |
| Tezos | 06/30/2018 | Public | Tenderbake | PoS | Upgraded in April 2022 from Emmy+ (Ithaca 2) |
| Bitcoin SV | 11/15/2018 | Public | Nakamoto consensus | PoW | Bitcoin Cash fork |
| Algorand | 06/10/2019 | Public | Pure Proof of Stake | PoS | |
| Solana | 03/16/2020 | Public | Proof of History | PoH | Byzantine Fault Tolerance (BFT) on top of PoH |
| Polkadot | 05/26/2020 | Public | GRANDPA and BABE | PoS | Nominated Proof of Stake |
| Avalanche | 09/21/2020 | Public | Snowball algorithm | PoS | DAG (Directed Acyclic Graphs)-optimized PoS |
The difference between PoS mechanisms comes from the difference in criteria each mechanism applies to choose the validators and the winner. Although PoS algorithms are much more energy saving than PoW algorithm, energy efficiency also varies among PoS mechanisms. The difference comes from the hardware requirements of validators, programming language, number of nodes, transaction throughput, and more which are associated with different algorithm. While the overall differences of energy efficiency between PoS networks are minor, it is helpful to know the detail of the energy efficiency of networks.