Unit 3 – Distributed Consensus ( Short Notes)
Nakamoto Consensus
Introduced in Bitcoin (2008).
Combines:
Proof-of-Work (PoW) – miners solve puzzles.
Longest Chain Rule – chain with most accumulated work is
valid.
Ensures agreement among nodes in a Byzantine environment
(where some may be malicious).
Key for decentralized trust without central authority.
Proof of Work (PoW)
Process: Miners compete to solve a mathematical puzzle → first to
solve adds block → earns block reward (6.25 BTC, halves every 4
years).
Uses Hashcash system (SHA-256 in Bitcoin).
Target Hash: Miners must find a hash lower than the set difficulty
target by changing nonce values.
Features:
Hard to solve, easy to verify.
Incentive = new coins + transaction fees.
Adjusts difficulty every 2016 blocks (~2 weeks) to maintain
~10 min/block.
Challenges:
Energy-intensive: Expected ~0.3% world electricity by
2028.
51% Attack: Majority control can rewrite blockchain.
Slow confirmation: 10–60 min transaction times.
Resource-heavy: Requires ASICs & huge investment.
Proof of Stake (PoS)
Alternative to PoW → validators chosen based on stake
(ownership of coins).
Mechanism:
Nodes “stake” coins to become validator candidates.
Selection based on coin-age, randomization, and stake
size.
Validator proposes & verifies transactions → rewarded with
transaction fees.
Features:
Fixed coin supply (no mining of new coins).
Stake of malicious validator can be slashed (lost).
Advantages:
Energy-efficient (no puzzle-solving).
Promotes decentralization (no need for mining pools).
Impractical 51% attack (would require 51% of all coins).
Disadvantages:
Large stakers may dominate validation over time.
“Nothing at Stake” problem – validators can support
multiple forks.
Still relatively new & under research.
PoW vs PoS (Important Differences):
PoW = mining based on computation.
PoS = validation based on stake.
PoW = costly, energy-hungry, but proven.
PoS = energy-efficient, cheaper, but less battle-tested.
Proof of Burn (PoB)
Participants burn coins (send to unusable address) → gain right to
mine/validate.
How it works:
Burn coins → gain mining rights.
More coins burned = higher chance of selection.
Validators still earn rewards from block creation.
Advantages:
Energy-efficient (no computation race).
Encourages long-term commitment to network.
Reduces centralization (not based on wealth accumulation).
Challenges:
Seen as wasteful (coins destroyed permanently).
Reduces liquidity (less coins in circulation).
Rich holders could manipulate system by burning huge
amounts.
Limited adoption (used in Slimcoin, Counterparty).
Difficulty Level in Blockchain
Defines how hard it is to mine a block in PoW.
Maintains steady block time (Bitcoin = 10 minutes).
Adjustment rule: Every 2016 blocks (~2 weeks).
If blocks mined faster → difficulty increases.
If slower → difficulty decreases.
Factors influencing:
Network hash rate (more miners → higher difficulty).
Mining technology (ASICs → raise difficulty).
Market price (high BTC price → more miners join).
Implications:
Higher difficulty → higher cost & energy use
Encourages mining centralization (only big players survive).
Sybil Attack
Attacker creates multiple fake identities/nodes to control network
decisions.
Goal: Gain unfair influence (validate fake transactions, spread
false data, manipulate votes).
Types:
Direct Sybil Attack – Fake nodes directly interact with
honest nodes.
Indirect Sybil Attack – Attacker uses compromised
middleman nodes.
Examples:
Blockchain: confirm fake transactions.
P2P networks: spread malware files.
IoT: overload smart devices.
Prevention:
Cost for identity creation (e.g., PoW/PoS).
Reputation systems (trusted validators).
Identity validation (direct/indirect).
Hyperledger Fabric (Enterprise Blockchain)
Open-source blockchain by Linux Foundation.
Permissioned network (only verified members can join).
Supports modular design & smart contracts (chaincode).
Key Components:
Peer Nodes – maintain ledger, run chaincode.
Endorser peers: validate transactions.
Committing peers: update ledger.
Orderer – orders transactions into blocks (Raft, Kafka, Solo).
Ledger – blockchain (transaction log) + state database (current
values).
Chaincode – business logic (smart contracts).
Consensus – ensures ordering of transactions.
Channels – private sub-networks for confidentiality.
Membership Service Provider (MSP) – identity & access control.
Certificate Authorities (CAs) – issue/manage digital certificates.
Hyperledger Fabric SDK:
APIs + libraries (Java, Go, Node.js, Python).
Supports: submitting transactions, deploying chaincode, managing
members.
Benefits:
Open source & community-driven.
Private & secure → suitable for enterprises.
Access control (permissioned, role-based).
Chaincode flexibility for business rules.
Faster performance than public chains.
Limitations:
Complex setup & configuration.
Limited scalability for public use.
Higher cost to deploy & maintain.
Limited interoperability with other blockchains.
