9 factors to consider when choosing a blockchain consensus mechanism

Both broad and narrow considerations come into play when choosing a blockchain project’s consensus mechanism.

With great power — and decentralization — comes great responsibility. Creators of a blockchain project have many decisions to make, among them which consensus mechanism to employ. As with so much in crypto, there’s no singular “industrywide” solution or preference, and there are multiple details to review when making the choice.

While security and reliability are always top priorities, forward-looking blockchain projects must take both project-specific details and evolving trends into consideration before making a final decision. Below, nine members of Cointelegraph Innovation Circle discuss factors a blockchain project should consider when choosing a consensus mechanism and why they can play a role in long-term success.

The integrity and immutability of the chain

The chosen consensus mechanism must ensure the integrity and immutability of the blockchain are not compromised. A more energy-efficient mechanism can contribute to sustainability and reduce operational costs. Different consensus mechanisms offer varying degrees of decentralization, and selecting the most suitable one that aligns with the project’s goals and values is key. – Jason Fernandes, AdLunam Inc.

Your target customer

Who is going to buy your product? Do your customers value moats created by sunk costs (proof-of-work)? Are they highly risk-tolerant or, alternatively, do they have big budgets for audits (smart contracts)? Do they want arbitrage opportunities (proof-of-stake, DeFi)? Do they care most about sharing data with user protections (proof-of-honesty)? How important is scaling? Your choices are growing. – Stephanie So, Geeq

Scalability

Consider the importance of scalability. Some consensus mechanisms are better suited than others for delivering high throughput performance during high-volume situations. If a Web3 project wants to reach a substantial amount of users and activity in the future, it should build using fully capable blockchain solutions from day one. – Wolfgang Rückerl, ENT Technologies AG

Project parameters

When developing consensus mechanisms, developers should keep in mind the benefits and drawbacks associated with each and whether they have the infrastructure to support it. A project with low funding cannot afford a proof-of-work mechanism, while a project with a narrow user base should choose proof-of-authority over proof-of-stake to help ease onboarding and prevent a hostile takeover. – Abhishek Singh, Acknoledger

Balancing priorities

Balancing scalability, interoperability and privacy is crucial. PoW is secure, but not scalable. PoS boosts throughput, but may risk decentralization. For cross-chain compatibility, opt for mechanisms that play well with other networks. Enhance programmable privacy with secure multiparty computation, but note the computational cost. Weigh these trade-offs to align with your project’s objectives. – Tiago Serôdio, Partisia Blockchain

New and emerging methods

Consensus mechanisms are the foundation of your project, and there are actually many beyond PoW and PoS, such as proof-of-capacity, proof-of-activity and proof-of-burn. Others, such as proof-of-personhood, are emerging and can be rather controversial. Ensure you fully understand the landscape and pick the one that aligns best with your project’s long-term success. – Megan Nyvold, BingX

Sustainability

Something often overlooked by budding protocols is sustainability. Distinct from scalability, sustainability can encompass both the energy requirements of a solution and a community’s capacity to continue with its function. While some may think this is downstream of other, more prominent concerns, it’s worth considering how the exchange of value will be of any concern on an uninhabitable planet. – Oleksandr Lutskevych, CEX.IO

Long-term goals

It’s essential to choose a mechanism that suits the long-term goals of your project rather than merely going with what’s popular. For example, proof-of-stake was an incredible innovation as an alternative to the energy-costly proof-of-work mechanism. Still, it risks the drawbacks of increased centralization and downgraded security, which could become long-term issues. – Sheraz Ahmed, STORM Partners

International preferences

Proof-of-work is frowned upon in the European Union; proof-of-stake is favored because of climate concerns. Every mining server is trying to validate the transaction, but only one wins in the end. Gary Gensler and the U.S. Securities and Exchange Commission prefer PoW as a consensus mechanism because it is less prone to whale investor capture. However, as a counterargument, Blackrock is investing in miners now, so PoW may not be immune from it. – Zain Jaffer, Zain Ventures

This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.