Blockchain technology has been around longer than cryptocurrencies like Bitcoin, however, the concept gained much more attraction after Bitcoin leveraged the technology as its foundation.
Notably, at the heart of blockchain technology lies the concept of consensus algorithms.
Blockchain works in a distributed manner and doesn’t rely on a centralized authority to run and maintain everything. As a result, the system needs a mechanism to ensure that all the members are in sync with each other which is known as a consensus algorithm.
Bitcoin was created on the Proof of Work (PoW) consensus algorithm which was then used by many other blockchains. The limitations of PoW convinced the industry to look for alternatives. Different projects started introducing different mechanisms, most of which are built on an existing concept.
Stick around to discover more if you are just hearing blockchain consensus algorithms for the first time or you never understood what they represent.
Paxos can be considered one of the first algorithms which aimed to address the consensus issue within a distributed setup.
Leslie Lamport introduced the Paxos group of protocols in an article that was published in 1988. The Island of Paxos and the way its part-time parliament was managed inspired Lamport to use the idea in a distributed system.
The Parliament consisted of part-time legislators as they had their own businesses and were not willing to dedicate their whole time to setting up the rules of the land. There was no secretary, therefore, the legislators came up with a way to keep the system running.
Each legislator would hold a copy of the ledger which had a sequence of the laws that were passed. As a new decree was in place, legislators would add it to the ledger in that specific order.
The ink used for writing these ledgers was not erasable, making them secure against tampering.
“Consistency of Ledgers” was a requirement in the parliament that ensured that no two ledgers consisted of contradictory rules. However, this requirement didn’t guarantee that a passed decree was included in all ledgers or the majority of them.
Another requirement then was added to the parliament rules. The majority of legislators had to be present at the time a decree was proposed and passed to ensure that it will be recorded sufficiently.
In 1993, the idea of Proof of Work (PoW) was laid down by Cynthia Dwork and Moni Naor. The proposed mechanism aimed to prevent spam emails by asking the sender to put some skin in the game.
In 1997, Adam Back announced Hashcash, a quite similar system to the one proposed by Dwork and Naor for preventing spam emails. In 2002, Back published its “Hashcash – A Denial of Service Counter-Measure” article.
However, it was in 1999 that Markus Jakobsson and Ari Juels formalized Proof of Work (PoW) by publishing their “Proofs of Work and Bread Pudding Protocols” article.
In 2004 and 4 years before the creation of Bitcoin, Hal Finney introduced the “Reusable Proofs of Work” which was based on the Back’s Hashcash. The RPOW was probably the first time that PoW was used in a digital currency.
Eventually, in 2008, the current Proof of Work consensus mechanism was introduced in the Bitcoin whitepaper by Satoshi Nakamoto, the anonymous creator(s) of Bitcoin.
It’s worth mentioning that Finney was the receiver of the first Bitcoin transaction. On January 12th, 2009, Satoshi sent 10 bitcoins to Finney.