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Tue, Dec 15, 2020 3:38 PM

New Stage for Vechain: Consensus Algorithm Explained

Vechain consensus

On 25th February 2020, VeChain received a new consensus algorithm named Proof of Authority 2.0. In this article, we will tell you about VeChain, its original proof-of-authority consensus algorithm and 2020’s PoA 2.0 update.

VeChain In A Nutshell

VeChain Foundation was founded in 2015. The project’s main product was a blockchain platform designed for tracking and monitoring goods throughout supply chains. The second application of VeChain is purely financial – transfer of value. 

Being aimed at the mass market from the start, VeChain had to provide a high transaction throughput and a high security level. To combine both these properties, VeChain developers based the VeChainThor blockchain on the proof-of-authority consensus. As claimed by the VeChain team, the VeChainThor blockchain can process up to 10,000 transactions per second (TPS) if required while having efficient security against attacks. 

VeChain has two tokens in its ecosystem: VET and VTHO. VET  is the value token used in transactions, VTHO is the token paid as fees to validators for processing VET transactions.

VeChain Consensus Mechanism

The VeChainThor blockchain was originally based on the proof-of-authority consensus protocol. Proof-of-authority is said to outperform the previously existing consensus protocols being able to ensure sustainability in poor network conditions without compromising functionality. Besides that, proof-of-authority does not cause computational power on the network to increase as the network expands and has no requirements for node communication for consensus to be reached.

There are two types of masternodes on the VeChainThor blockchain: authority masternodes and economic masternodes. The former are responsible for network consensus, while the latter enhance network stability through power distribution.

Authority Masternodes

Authority Masternodes are responsible for signing blocks and confirming transactions on the VeChainThor blockchain. There will only ever be 101 authority masternodes, and all of their owners have had their identities confirmed, some of them having passed a rigorous KYC procedure. Authority masternodes cannot be run anonymously, and AM owners’ identities are known across the AM network. Besides a confirmed identity, an authority masternode owner must have 25,000,000 VET in their wallet and a well-protected server on which the masternode will be hosted.

In case an authority masternode owner is found acting maliciously to the network (not complying with VeChain governance voting results, exposing their AM to vulnerabilities, etc), the VeChain Foundation may decide to remove or replace such a node. In this case, the AM owner’s reputation may be harmed.

This minimizes the chances of a 51% attack, as it will require more than half of the network’s authority masternodes to collude and act unanimously in a fraudulent way.

However, the 51% attack is not the only threat relating to the activity of nodes. To ensure blockchain security and continuity, consensus must be reached even in poor network conditions without compromising the network’s functionality and security. This means that network sustainability must be preserved if multiple authority masternodes are out of service.

To tackle this problem, VeChain developers have realized a mechanism that enables authority masternodes to continuously perform inter-node communication in multiple rounds to reach consensus. Therefore, if there are less than 101 active authority masternodes, the protocol will enable the remaining active AMs to run multiple communication rounds to preclude a network takeover by a group of malicious nodes and ensure the network’s continuity.

Economic Masternodes

Economic nodes do not participate in reaching the network consensus, block signing, and transaction processing. They are tasked with ensuring the stability of the VeChain network by distributing the power and privilege across VeChain’s ecosystem.

As per the VeChain white paper, there are three types of economic masternodes: Mjolnir masternodes, Thunder masternodes, and Strength masternodes. To have a Mjolnir masternode, one should have at least 15 million VET; to have a Thunder masternode, one should at least have 5 million VET; to have a Strength masternode, one should have at least 1 million VET.

The VeChain PoA 2.0

On 25th February 2020, VeChain Foundation introduced an updated consensus protocol for its blockchain. The protocol has been named proof of authority 2.0 Surface and designed with regard to the principle ‘hope for the best and prepare for the worst’. The PoA 2.0 presents a combination of Satoshi Nakamoto’s consensus protocol and asynchronous Byzantine fault tolerance protocol.

In POA 2.0, both these protocols balance each other and make the network’s performance and security better. The Nakamoto protocol provides good network functionality, while the asynchronous Byzantine fault protocol protects the network from a 51% attack in bad network conditions when a large share of nodes cannot communicate with each other due. Such conditions can be caused by a DDoS attack or some global physical damage.

Conclusion

The PoA 2.0 update is believed to have raised the security level on the VeChainThor blockchain by bringing together the consensus algorithm used in Bitcoin and asynchronous Byzantine fault tolerance consensus algorithm. As a result, the combination of two consensus algorithms has increased VeChain’s ecosystem security without compromising its performance.


The content of this article is for informational purposes only and should not be construed as any sort of advice. We ask you to do your research.

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