Blockchain

Unit 2 • Chapter 3

Security and Consensus in Bitcoin Blockchain

Summary

Blockchain technology utilizes consensus algorithms to ensure secure and transparent transactions. Two main algorithms discussed are Proof of Work (POW) and Proof of Stake (POS). POW requires solving complex mathematical problems with high computational power, leading to slow and costly operations. POS requires staking cryptocurrency instead of solving problems, offering faster and energy-efficient validation. Delegated Proof of Stake (DPOS) involves token holders voting for delegates to validate transactions, achieving faster transaction times and higher throughput. Leased Proof of Stake (LPOS) is a variant that allows users to lease their currency to delegates for rewards, promoting decentralization. However, LPOS can still face centralization risks if a small group of delegates control a significant portion.

Concept Check

What is the consensus algorithm that aims to address energy consumption and computational power problems in blockchain?