Consensus Mechanism Used in Shardeum

What is Consensus in the Context of Blockchain?

The term ‘consensus’ within public blockchain networks denote a collective agreement among node operators to validate transactions. It is like everyone in a room agreeing on what was said before they write it down in the official record.

Imagine you’re in a room with 100 people, and every time someone says something, the individuals write it down on their own notepad provided majority of them agree on what was said. This is how transactions are written/confirmed/recorded on a blockchain – and, everyone (nodes) have their own copy of the validated transactions.

Here’s a simplified example of how the consensus process plays out normally.

If they agree (Consensus is reached):

• Let’s say someone triggers the process (end user in real world) by shouting out, “I’m giving Heena $5.”
• Upon hearing this, everyone (nodes in blockchain) in the room makes a temporary note of it, acknowledging they’ve received the transaction details
• Next, they all check their notes to ensure that the person has $5 to give.
• If most of the people in the room (let’s say at least 51 out of 100) agree that the statement is true (based on their notes), then everyone finalizes it on their notepad. This confirms that Heena’s account has been credited with $5, while the sender’s account has been debited by the same amount. This record is now permanent and cannot be changed
• Once confirmed, this finalized instance (transaction in real world) is then added to the “master record” (blockchain network) that keeps track of all such instances (both financial and non-financial), ensuring a comprehensive and unalterable record

If they don’t agree:

• Let’s say someone shouts out, “I’m giving Jay $5.”
• Upon hearing this, everyone in the room makes a temporary note of it, acknowledging they’ve received the transaction details.
• Next, they all check their notes to determine if the person has $5 to give.
• If the majority in the room (say at least 50 or more out of 100) can’t agree that the statement is true (based on their notes), the transaction is not finalized on their notepads.
• Without consensus, the transaction isn’t added to the “master record”. (blockchain network). Officially, the transaction is rejected, and both Jay’s and sender’s accounts remain unchanged.

What is Consensus Mechanism or Consensus Algorithm?

Having established the importance of consensus in validating transactions, one might wonder how such agreement is methodically achieved in the vast world of blockchain/distributed ledger system. Enter the “consensus mechanism” or “consensus algorithm.” It’s a set of rules and procedures that blockchain networks follow (through node operators) to reach a common agreement about the authenticity of a transaction or a set of transactions. Different blockchains use different consensus mechanisms, each with its strengths and challenges, to ensure that every participant’s copy of the digital ledger is consistent with the others.

This mechanism not only confirms the validity of transactions but also enhances the security and resilience of the blockchain against malicious activities. Keep in mind, public blockchains are open to everyone and run by participants from all over the globe, embodying the technology’s fundamental principle: decentralization. Therefore, consensus algorithms play a pivotal role in ensuring that commercial transactions are accurately verified, much like in conventional systems, but without the need for intermediaries

As the backbone of blockchain technology, the consensus mechanism’s choice significantly influences the network’s efficiency, security, and scalability. For instance, the “Proof of Work” mechanism, employed by Bitcoin, involves solving complex puzzles with the help of powerful computers to validate transactions. While this method offers strong security, it is energy-intensive and may not be the most efficient. On the other hand, “Proof of Stake” offers a more energy-efficient approach by allowing participants with adequate stake (typically by offering native coins as collateral) to validate transactions and secure the network. The evolving world of blockchain is continually exploring new consensus mechanisms, striving for a balance between speed, security, and sustainability. This underscores the fact that the consensus mechanism is not just a technical feature, but a crucial determinant of a blockchain network’s overall performance and impact.

Consensus Mechanism on Shardeum

Shardeum is an EVM-based layer 1 network that scales linearly to maintain low fees forever through dynamic state sharding. It uses a novel combination of Proof of Stake (PoS) + Proof of Quorum (PoQ) consensus mechanism. While we touched upon how Proof of Stake mechanism works, let’s first look at why a need for a second consensus mechanism within the same chain arise before we get down to explain Proof of Quorum.

Why Two Consensus Mechanisms on One Blockchain?

Different consensus mechanisms have distinct strengths and weaknesses in terms of security, speed, and fairness. While a system can rely on a Proof of Stake (PoS) consensus mechanism, there are scenarios or specific needs, particularly in a sharded network, where PoS by itself might fall short of ensuring optimal performance. This is where a second type of consensus mechanism, like Proof of Quorum, will be really useful. Sharding is a process by which a distributed system splits its load into multiple smaller shards or partitions to enable parallel transaction execution, efficiency and high speed.

Shardeum, to begin with, prioritizes high fairness in transaction validations i.e. transactions are validated and processed on a first come first serve (FCFS) basis. This is followed by consensus done at the transaction level, setting it apart from the traditional block-level consensus systems. Within its sharded architecture, this approach not only set it up for linear scalability but also encourages wider public participation. By adding more nodes, the network will scale up proportionally to the extent of added nodes while maximizing decentralization. The network would be able to maintain overarching stability and consistent intra-shard operations by utilizing both PoS and PoQ algorithms. This dual mechanism, tailored for this unique setup, offers immediate finality to transactions and prevents double spend attacks.

Finally, an additional consensus protocol enhances the foundational (L1) layer, bolstering resistance against malicious entities seeking vulnerabilities to misappropriate funds and destabilize the network. This multi-layered approach can lead to a more resilient, democratic, and adaptable blockchain system at scale like Shardeum.

What is Proof of Quorum (POQ)?

In Shardeum, validator nodes take a specialized approach. They validate transactions individually using a timestamp-based ordering protocol. Instead of broadcasting to the entire network, these transactions are then gossiped only to nodes within their specific consensus group or shard. Crucially, Shardeum’s validator nodes store only the latest state of accounts they oversee, not the entire network’s data. This selective sharing and storage strategy not only conserves resources but also boosts transaction speed, since data is confined to its pertinent shard rather than being broadcasted throughout the network.

Every node will be made aware that all other nodes within a consensus group have knowledge about a specific transaction resulting in a trustless and leaderless collection of electronic votes (or quorum) in the form of receipts. When there are more than 50% of the receipts (quorum), transactions are confirmed on the network with very low latency preventing congestions and outages. And, such individual transactions are batched together in groups/blocks before passing them on to archive nodes on the network.

Proof of Stake (PoS) on Shardeum

Staking is an essential component in the validation process of Shardeum to discourage and slash dishonest nodes. The network will decide the minimum staking amount ahead of its mainnet launch soon. But as the co-founders of the project have previously said, their aim is to mainstream the node operation process so an average person can run a node on blockchain in return for rewards regardless of financial power or technical expertise. Having said that, the project can be expected to go for a reasonable staking requirement to eliminate or minimize spam activity and DDoS attacks.

Auto-rotation of Validator Nodes with Standby Nodes

Along with its unique gossip protocol, the consensus algorithm used on Shardeum will help to auto-rotate the validator nodes on the network. Besides the validator and archive nodes, there will be a third and unique type of node on Shardeum called ‘standby nodes’. These are nodes standing by in the network and not currently participating in consensus. Standby nodes help in more than a few ways. They help scale Shardeum quicker when more transactions are pending or during high traffic. They will also be cycled-in to the network at the end of every cycle by replacing the oldest active validators in the network.

This periodic reshuffling ensures that no single validator node or group gains dominance over a specific shard for an extended period. It introduces unpredictability, bolstering the system against collusion or malicious attacks. Furthermore, by allowing different nodes the opportunity to validate various shards over time, it promotes equitable participation and decentralization.

Conclusion

A consensus mechanism in blockchain is important in ensuring the integrity of the blockchain and ensuring that all transactions are valid. However, there is no one-size-fits-all when it comes to choosing the appropriate consensus mechanism for a network, and the most appropriate mechanism for a particular blockchain will depend on its desired levels of the trilemma – security, scalability, and decentralization. Shardeum, though, aims to maintain all the three desirable properties of a public blockchain simultaneously at any given point on the network by scaling linearly to ensure low and constant transaction costs forever. And it’s consensus mechanism – Proof of Quorum (PoS) & Proof of Stake (PoS) – is designed precisely and uniquely to solve the scalability trilemma and prepare for the blockchain technology’s mass adoption.

Frequently Asked Questions (FAQs)

1. What is Blockchain Consensus?

The consensus mechanism sits at the very core of a blockchain, acting as its heartbeat. It’s the means by which trust is established in a decentralized manner, negating the need for a central governing authority. By validating and verifying each transaction, the consensus mechanism helps to maintain the integrity and security of the entire network. This process of achieving widespread agreement among disparate participants is fundamental. It not only fosters a sense of reliability and trustworthiness but also plays a crucial role in preventing fraudulent activities. As a result, despite the diverse and distributed nature of participants, everyone can have confidence in the consistency and accuracy of the shared data in a trustless way.

2. What is the Consensus Mechanism Used by Shardeum?

Shardeum uses a novel combination of Proof of Stake (PoS) + Proof of Quorum (PoQ) consensus mechanism. PoS ensures that only validators with sufficient stake can validate and process transactions to secure the network. Proof of Quorum enables the network to generate a receipt showing that a majority of a consensus group has voted for the transaction resulting in a trustless and leaderless collection of electronic votes (or quorum) in the form of receipts. Once an individual transaction reaches more than 50% of the receipts (quorum), it is confirmed on the network with instant finality. Such individual transactions are batched together in groups/blocks before passing them on to archive nodes on the network.

Shardeum also divides the network into shards, each of which processes its own transactions in parallel. This combination of PoS, PoQ, and sharding allows Shardeum to process more transactions per second as more nodes join the network, without sacrificing security. The consensus mechanism used in Shardeum is designed in a unique way to help it scale linearly, promote high fairness and wider public participation.

3. How many Types of Consensus are there?

Different consensus mechanisms can be used on blockchain networks depending on their value propositions. Proof-of-Stake (PoS) and its variants are the most common consensus mechanisms used in the blockchain ecosystem today which includes Ethereum. Proof-of-Work or PoW is used in older networks like Bitcoin.

4. What are the Elements of Consensus?

Receiving and ordering transactions on a chronological basis is important which will be your stepping stone to process them in a fair manner. This can be done by taking the help of time stamp based ordering protocols, gossip protocols, Practical Byzantine Fault Tolerance (PBFT) protocols among others. Next step is to verify the transactions for its validity followed by reaching consensus among nodes validating transactions and proposing blocks. This will be done based on the consensus protocol of a blockchain platform. Once a transaction (in Shardeum) or block that contains multiple transactions (in typical blockchains) achieve majority consensus, they will be confirmed and added to the network chain.

The interval from the moment a user initiates a transaction or block until its confirmation/processing is denoted as ‘latency time’. On the other hand, ‘finality time’ refers to the span necessary to ensure that the transaction becomes irreversible and conclusively settled. Blockchain platforms usually desire low latency and instant finality times. And as indicated previously, public blockchains record transactions transparently, which means, anyone can see a transaction from its initiation through when it gets confirmed and finalized on the network. Together, these components ensure a cohesive environment that underpins the integrity and functionality of the entire blockchain network.

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