The Evolution of the Blockchain Consensus Protocol

Authors

Gary Zimmerman – CMO, Principal Consulting Analyst

Abstract

The case for adopting distributed ledger (blockchain) solutions is gaining ground in enterprises.  In fact, 83% of enterprises now see compelling use cases for the technology. But not all distributed ledgers are equal. One of the biggest of differences lies in how consensus is achieved. We care about consensus because that is how everyone involved in the ledger decides that a transaction is verified and can be securely written to the immutable ledger.  Bitcoin, the early use case for Blockchain, uses a proof-of-work consensus mechanism, where all the nodes have the same privilege. The idea was to create a network of equals with no centralized server/entity, nor any hierarchy.

While it is a great architecture for assuring that the four desired properties of blockchain technology (decentralization, security, transparency, immutability) are enabled, heavy experimentation and use across different cases since 2009 has uncovered a downside of the Bitcoin model.

These downsides, which are detailed later in this report, are primarily a result of the consensus model used. This has led to the development of different models for achieving consensus, which we will explain in this report. We’ll provide a technical level set as to what consensus is all about and how it applies to Blockchain and other distributed ledgers. We’ll then review several newer approaches to solve for consensus and data consistency across distributed systems. We’ll look at the strengths and weaknesses of these approaches and provide advice for large enterprises applying these consensus models in various scenarios.