Consensus algorithms are processes in which validators (also known as nodes or miners) on a blockchain network agree on the current state of the network. This basically entails agreeing on whether the transaction presented by the validator is genuine. Fraudulent or inaccurate transactions are rejected by the network, assuming that all validators are acting honestly and without malicious intent. Validators are rewarded with cryptocurrencies for submitting accurate and trustworthy transactions, while attackers are punished depending on the consensus protocol.
For example, in proof-of-work (PoW) networks such as Bitcoin (BTC), validators have to spend energy on expensive hardware to validate transactions, and if successful, they receive new tokens. If they act maliciously, they get nothing and the loss comes from wasted energy wasted sending fraudulent or inaccurate transactions.
In Proof-of-Stake (PoS), users stake tokens and receive additional tokens for sending genuine transactions while losing a portion for sending incorrect transactions.
In Proof of Time (PoT) protocols, the principle is the same: validators receive additional tokens for sending authentic transactions, but lose tokens for sending inaccurate or malicious transactions.
Although PoS and PoT have some similarities, they are two completely different protocols.
What is Proof of Stake?
PoS is a consensus algorithm that works when users stake their tokens as collateral by locking them in a smart contract. The system works by selecting a validator, also known as miners or nodes, to process a block of transactions. The validator must check the transactions inside the block to make sure there are no inaccurate information inside.
The validator then submits the block to the blockchain and, if the block was validated correctly, it receives additional tokens as a reward. If a validator behaves maliciously or lazily, usually by sending incorrect or fraudulent transactions, it loses some of the staked tokens.
Validators who staked more tokens are more likely to be selected to validate transactions. Staking more tokens also earns the validator additional rewards as they usually earn a fixed percentage depending on the blockchain network. For example, in Ethereum 2.0, validators are currently earn 4.2% on their tokens. Validators are also more likely to be selected if they have staked their tokens for a longer period of time.
Anyone can become a PoS validator, but the barrier to entry is high due to the popularity of the multi-node protocol in PoS blockchains. The more nodes in the network, the more tokens a user will need to become a validator.
As such, staking pools run by validators are typically used by average crypto users who want to stake their tokens. In this system, the user contributes their tokens to the pool, and the tokens are placed by the validators on behalf of the token owner. In exchange for this, users typically pay a “pooling fee”, which is a percentage of the tokens they earn by staking.
What is Proof of Time?
Proof-of-time (PoT) is a consensus algorithm that uses a voting system to select network validators and focuses on how long the network validator has been active on the network as well as its reputation. The protocol was developed analog and is based on delegated proof of stake (dPoS), which is a modified version of PoS.
Proof-of-time treats its ledger as a time chain and works by using a ranking score, a verifiable delay function (VDF), and tokens to determine who can add a new transaction to the ledger. The ranking system works by assigning points to online validators based on their age and past performance. Validators receive higher scores for being trustworthy and active on the network for a longer time. Staking more tokens also increases the likelihood of a validator being selected.
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PoT is similar to dPoS in that users on the network vote to decide which delegates can validate the next block. However, there are some differences in the voting process as the PoT has multiple voting stages. In the first round of voting, validators, known as time pickers, submit a block containing the data, including the transactions to be added to the time chain. If the block is accepted, the block is validated and all transactions within the block are processed.
Time voters are selected through a selection process that takes into account voter rankings and the number of staked tokens. The process uses this information, as well as the VDF, to randomly select a time voter, and only one can be selected at a time.
Time voters also run a VDF to determine if they have been selected to add a new block to the time chain. If they were chosen, they validate the block, generate a VDF proof, and send both data to the rest of the nodes in the time chain.
In the second step, the VDF block and proof are sent to 1000 other time voters for double validation before being added to the time chain. If voters agree to accept the transaction most of the time, it is added to the time chain.
Comparison of two consensus protocols
PoS and PoT have several things in common. First, they both require validators to stake tokens as collateral when validating transactions, with a higher stake increasing the chances of being selected. The main difference is the ranking and voting system used by PoT, followed by an additional check of 1000 validators before the transaction is sent to the ledger.
PoS is the more popular and familiar option used by Solana, Polkadot, Cardano and Ethereum 2.0. When it comes to benefits, both systems require users to stake tokens instead of wasting energy, making them both energy-efficient proof-of-work (PoW) alternatives. This can also work as a disadvantage, since attackers with access to a large amount of funds could theoretically gain control of the network.
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However, this is an unlikely scenario. For example, to initiate a 51% attack, an attacker would need to own 51% of the tokens on the network, which is very unlikely and extremely risky for an attacker, especially with more popular blockchains like Ethereum and Cardano. PoT also increases security by requiring every transaction to be double-checked by 1,000 validators, with 2/3 of them having to agree on whether the transaction should be added to the ledger.
Each blockchain network has specific requirements tailored to the needs of the network. Many blockchains stick to PoW and PoS for their needs, while additional algorithms such as PoT, dPoS, and proof of history (used by Polkadot in conjunction with PoS) cater to the needs their blockchain networks face.
Credit : cointelegraph.com