After a certain amount of time (such as 30 days) the staked cryptocurrency can count towards the owning user being selected to publish the next block. The staked cryptocurrency then has its age reset, and it cannot be used again until after the requisite time has passed. This method allows for users with more stake to publish more blocks, but to not dominate the system – since they have a cooldown timer attached to every cryptocurrency coin counted towards creating blocks. Older coins and larger groups of coins will increase the probability of being chosen to publish the next block.
To prevent stakeholders from hoarding aged cryptocurrencies, there is generally a built-in maximum to the probability of winning. When the choice of block publisher is through a delegate system, users vote for nodes to become publishing nodes – therefore creating blocks on their behalf. Blockchain network users’ voting power is tied to their stake so the larger the stake, the more weight the vote has. Nodes who receive the most votes become publishing nodes and can validate and publish blocks. Blockchain network users can also vote against an established publishing node, to try to remove them from the set of publishing nodes. Voting for publishing nodes is continuous and remaining a publishing node can be quite competitive. The threat of losing publishing node status, and therefore rewards and reputation is constant so publishing nodes are incentivized to not act maliciously.
Additionally, blockchain network users vote for delegates, who participate in the governance of the blockchain. Delegates will propose changes, and improvements, which will be voted on by blockchain network users. It is worth noting that a problem known as “nothing at stake” may arise from some proof of stake algorithms. If multiple competing blockchains were to exist at some point (because of a temporary ledger conflict as discussed in Section 4.7), a staked user could act on every such competing chain – since it is essentially free to do so. The staked user may do this as a way of increasing their odds of earning a reward. This can cause multiple blockchain branches to continue to grow without being reconciled into a singular branch for extended periods of time. NISTIR 8202 BLOCKCHAIN TECHNOLOGY OVERVIEW 23 This publication is available free of charge from: https://doi.org/10.6028/NIST.IR.8202 Under proof of stake systems, the “rich” can more easily stake more of the digital assets, earning themselves more digital assets; however, to obtain the majority of digital assets within a system to “control” it is generally cost prohibitive. 4.3 Round Robin Consensus Model Round Robin is a consensus model that is used by some permissioned blockchain networks. Within this model of consensus, nodes take turns in creating blocks. Round Robin Consensus has a long history grounded in distributed system architecture.
To handle situations where a publishing node is not available to publish a block on its turn, these systems may include a time limit to enable available nodes to publish blocks so that unavailable nodes will not cause a halt in block publication. This model ensures no one node creates the majority of the blocks. It benefits from a straightforward approach, lacks cryptographic puzzles, and has low power requirements. Since there is a need for trust amongst nodes, round robin does not work well in the permissionless blockchain networks used by most cryptocurrencies. This is because malicious nodes could continuously add additional nodes to increase their odds of publishing new blocks. In the worst case, they could use this to subvert the correct operation of the blockchain network. 4.4 Proof of Authority/Proof of Identity Consensus Model
The proof of authority (also referred to as proof of identity) consensus model relies on the partial trust of publishing nodes through their known link to real world identities. Publishing nodes must have their identities proven and verifiable within the blockchain network (e.g., identifying documents which have been verified and notarized and included on the blockchain). The idea is that the publishing node is staking its identity/reputation to publish new blocks. Blockchain network users directly affect a publishing node’s reputation based on the publishing node’s behavior. Publishing nodes can lose reputation by acting in a way that the blockchain network users disagree with, just as they can gain reputation by acting in a manner that the blockchain network users agree with. The lower the reputation, the less likelihood of being able to publish a block. Therefore, it is in the interest of a publishing node to maintain a high reputation. This algorithm only applies to permissioned blockchain networks with high levels of trust. 4.5
Proof of Elapsed Time Consensus Model Within the proof of elapsed time (PoET) consensus model, each publishing node requests a wait time from a secure hardware time source within their computer system. The secure hardware time source will generate a random wait time and return it to the publishing node software. Publishing nodes take the random time they are given and become idle for that duration. Once a publishing node wakes up from the idle state, it creates and publishes a block to the blockchain network, alerting the other nodes of the new block; any publishing node that is still idle will stop waiting, and the entire process starts over. This model requires ensuring that a random time was used, since if the time to wait was not selected at random a malicious publishing node would just wait the minimum amount of time by default to dominate the system. This model also requires ensuring that the publishing node waited the actual time and did not start early. These requirements are being solved by executing
4. Consensus Mechanisms in Blockchain
4.1 Proof of Work (PoW) Consensus Model
Proof of Work is a consensus mechanism where nodes (called miners) must solve a computationally difficult puzzle to add a new block to the blockchain.
4.1.1 Working Principle
A node must find a nonce value such that:
SHA256("blockchain" + nonce) → hash starting with “000000”The SHA-256 algorithm is used to generate hash values.
The process involves repeated guessing (trial and error).
4.1.2 Example of Puzzle Solving
| Input | Result | Status |
|---|---|---|
| blockchain0 | Hash not starting with required zeros | Not solved |
| blockchain1 | Hash not starting with required zeros | Not solved |
| blockchain10730895 | Hash starts with “000000” | Solved |
Total attempts: 10,730,896 guesses
Time taken: 54 seconds
4.1.3 Difficulty Adjustment
Increasing required leading zeros increases difficulty:
| Difficulty | Attempts | Time |
|---|---|---|
| 000000 | 10 million | ~54 seconds |
| 0000000 | 934 million | ~1 hour 18 minutes |
✔ More zeros → exponentially harder puzzle
4.1.4 Key Characteristics
No shortcut exists; requires brute-force computation
Requires:
Time
Processing power
Electricity
Ensures security through computational effort
4.1.5 Reward System
Nodes solving the puzzle receive:
Cryptocurrency rewards
Transaction fees
This is called the incentive model
4.1.6 Block Verification Process
Miner solves the puzzle
Broadcasts block with valid nonce
Other nodes verify with a single hash
Block is added to blockchain
Block is propagated across the network
✔ Verification is easy, but solving is difficult
4.1.7 Mining Pools
Miners combine resources in pools
Work is divided among nodes:
| Node | Nonce Range |
|---|---|
| Node 1 | 0 – 536,870,911 |
| Node 2 | 536,870,912 – 1,073,741,823 |
| Node 3 | 1,073,741,824 – 1,610,612,735 |
| Node 4 | 1,610,612,736 – 2,147,483,647 |
Rewards are shared among participants
✔ Benefits:
Faster results
More consistent rewards
4.1.8 Security Against Attacks
PoW helps prevent the Sybil Attack:
Attackers create multiple fake identities
PoW counters this by requiring:
Real computational power
Costly hardware
✔ Influence depends on computing power, not number of identities
4.2 Proof of Stake (PoS) Consensus Model
Proof of Stake is an alternative consensus mechanism where validation power depends on ownership (stake) rather than computational work.
4.2.1 Working Principle
Users lock cryptocurrency as stake
Probability of creating a block depends on:
User Stake / Total Network Stake
✔ More stake = higher chance of selection
4.2.2 Key Features
No need for heavy computation
Energy efficient
Faster than PoW
4.2.3 Staking Mechanism
Cryptocurrency is:
Locked in wallet
Temporarily unspendable
Used as a guarantee of honest behavior
4.2.4 Rewards in PoS
Rewards typically include:
Transaction fees
Some networks:
Do not create new coins
Already have full supply distributed
4.2.5 Advantages of PoS
Low energy consumption
Reduced hardware requirements
Environmentally friendly
Scalable
4.2.6 Comparison: PoW vs PoS
| Feature | Proof of Work | Proof of Stake |
|---|---|---|
| Resource Use | High | Low |
| Basis | Computation | Stake |
| Energy Consumption | High | Low |
| Reward | New coins + fees | Fees (mostly) |
| Security | Hardware-based | Economic-based |
5. Conclusion
Proof of Work and Proof of Stake are two fundamental blockchain consensus mechanisms:
PoW ensures security through computational difficulty
PoS ensures efficiency through economic incentives
Both models aim to maintain trust, security, and decentralization in blockchain networks.
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