Various novel approaches are taken to assure consensus on the state of a blockchain amongst its participants. Blockchain networks utilize different configurations to obtain desired levels of decentralization, speed, throughput and transaction finality. In general, there is a trade-off between various blockchain attributes that must be optimized. The individuals who contribute to the validation of transactions on a blockchain network are rewarded with a periodic emission of the network currency.
Proof-of-Work Mining
In a proof-of-work consensus protocol, a user commits their computing power to solving an algorithmic computation in an effort to win the ‘mining reward,’ or periodic coin issuance. The 'miner' of a block, who has solved the most recent instance of the computation, also gains the right to verify a batch of transactions and collect the related transaction fees. With the addition of each valid block to the chain, the algorithm resets and miners race to continue the blockchain where the last successful miner left off. The ‘difficulty’ of these algorithms adjusts periodically based on the change in network hashrate, or total computing power.
Proof-of-Stake Validation
Proof-of-Stake consensus algorithms replace 'miners' and their competing computing power with ‘stakers’ who commit capital to the consensus process to receive intermittent rewards in the form of the network’s native token. ‘Stakers’ generally must keep a consensus 'node' online to consistently receive their rewards. Most proof-of-stake protocols are inflationary in nature, but save validators the cost of computing power and energy. Though there are many popular proof-of-stake protocols, Ethereum is set to emerge dominant as the backbone for Web 3.0.