Blockchain model. Photo: Shubham Dhage

Top 5 types of blockchains and how they work

Everyone’s talking about blockchain these days. But what are they, and how do they work? Are they all the same?

While they all fall under the distributed ledger umbrella, there are many different types of blockchain algorithms that run on unique consensus mechanisms. Blockchains differ in terms of characteristics that define their value, efficiency, level of security and decentralisation. 

What blockchains do

Blockchain is a peer-to-peer distributed system that operates on a consensus mechanism that performs two duties: to validate and verify transactions.

If someone sends 10 Bitcoins to you, the various nodes of a blockchain will follow the rules of the network’s consensus mechanism to validate the asset transfer. After which, blocks of data are stored on nodes, they connect with each other and form a chain. Nodes ensure that all transaction details check out and subsequently record them as a block on the Bitcoin blockchain.

Pros and Cons

Despite their level of security, every blockchain consensus mechanism has its pros and cons. Some, like the Proof-of-Work model that Bitcoin is built upon, consumes more energy and time than others while remaining vulnerable to attacks by saboteurs. Others may be faster and more efficient yet susceptible to network breakdowns. Nevertheless, Bitcoin led the way for newer consensus mechanisms to emerge. The newer ones adapt from existing algorithms that are available as open-source codes, with each new blockchain architecture providing solutions to earlier problems while grappling with issues of their own.

Perhaps, that’s just the nature of technology; there is always room for improvement.  Now, let’s dive into the five most popular blockchain structures and their degree of security. 

Proof-of-Work (PoW)

This is how Bitcoin came to be. The Proof-of-Work (PoW) blockchain model is the earliest one known to the public and one that many are most familiar with.  

On a Proof-of-Work network, miners compete to be the first to validate transactions so that they can earn rewards. Once a miner completes the validation, other nodes will conduct further checks on the block before adding it to the network. PoW is meant to be highly secure from issues like double-spending, which happens when the same crypto asset is spent twice – a tactic used by hackers to counterfeit blocks and steal funds. However, PoW cannot prevent 51% attacks, which happens when hackers gain majority control of the blockchain’s hash rate influencing the speed of transactions. This type of cyberattack allows hackers to easily manipulate the network by rewriting blocks of transactions and subsequently stealing funds. 

Proof-of-Stake (PoS)

Proof-of-Stake (PoS) is the next popular consensus algorithm. The Ethereum blockchain, which hosts the second major cryptocurrency, Ether, functions on a Proof-of-Stake model where validators are required to stake cryptocurrencies in order to perform their tasks. The higher the stake, the higher the chances of being assigned a block, ruling out competition among miners and reducing the amount of energy to perform each transaction. This model is safe from 51% attacks since attackers need to acquire a massive stake to increase their chances of getting blocks. Staking more cryptocurrencies will ultimately disincentivise the attack. 

Read more about cybersecurity threats affecting blockchain

Delegated Proof-of-Stake (DPoS)

Similar to the PoS model, a delegated PoS model, or DPoS, requires validators to stake cryptocurrencies in order to perform tasks. The additional requirement here is that validators have to win votes. Ideally, this voting process happens periodically so as to give more stakers a chance at becoming validators. After which, delegated validators can choose to work around a schedule for sending and creating blocks. This process makes DPoS one of the fastest consensus mechanisms as it allows people to work together in a partially centralised manner. However, it is less secure than the PoS and PoW mechanisms since fewer people are in charge of the network’s operations. While this means that the network can quickly detect malicious delegates and vote them out, delegates can still conspire with each other to sabotage the network.

Practical Byzantine Fault Tolerance (PBFT)

The Practical Byzantine Fault Tolerance algorithm, or PBFT, works on a hierarchical basis, comprising a single primary node and multiple secondary nodes. Once a transaction request is sent, the primary and secondary nodes will attempt to consensually validate the details before creating blocks. What’s unique here is that transactions don’t need to be validated by all of the nodes on a blockchain, just a little over two-thirds will do. It leaves space for no more than a third of faulty or malicious nodes to be present, allowing the network to operate seamlessly without crashing.

While the security feature retains the network’s efficiency, it may be vulnerable to Sybil attacks, which usually happens after an attacker creates a large number of pseudonymous identities. When a person controls multiple nodes, they can attack the system. 

Asynchronous Byzantine Fault Tolerance (ABFT)

The Asynchronous Byzantine Fault Tolerance (ABFT) algorithm is adapted from the PBFT model but without the hierarchy. There is no such thing as leaders or primary and secondary nodes here, just honest nodes reaching a consensus at different times and independently validating transactions.

Since time is not a barrier, this method makes the protocol much faster than any of the above protocols. Like the PBFT, this model may be vulnerable to Sybil attacks too. 

These are some of the common consensus protocols in the blockchain industry. Other protocols include Proof of Activity, Proof of Burn, Proof of Weight, Sieve, and Proof of Capacity.

Eventually, we’re always looking for a blockchain that produces low energy and high throughput while remaining secure from cyber attacks. This happens to be one of the objectives of UKISS Technology: to build a secure and efficient blockchain network that validates identification documents without needing a centralised authority. 

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