Blockchain Algorithms

Blockchain algorithms are the backbone of the technology which makes the system to be decentralized, secure, and scalable. These algorithms allow distributed systems to work in a decentralized manner due to the check of transactions, data storage, and the reaching of consensus among the network members. In this comprehensive post, you will discover about what are algorithms, and how they contribute to the protection of the decentralized networks. 

What Are Blockchain Algorithms

In its simplest form, a algorithm is a well-defined set of procedures or a task that is executed on a blockchain network. They define how data is to be managed, how transactions are regarded, and how the participants will agree with the state of the blockchain. These algorithms operate in complete harmony to help make sure that the blockchain network is secure, transparent, and efficient.

Cryptographic methods and distributed consensus are the core of technology to ensure its success. It is hard to imagine how the security and trust that decentralized networks offer could be reached without the use of blockchain algorithms. The selection of the algorithm affects the performance, scalability, and efficiency of a blockchain system in a great way.

Types of Blockchain Algorithms

There are two primary categories of algorithms: Three categories of algorithms such as consensus algorithms, and cryptographic algorithms were identified. These two categories are grouped together so as to enable the proper working of the blockchain networks in a secure manner. 

1. Consensus Algorithms

They are important in the blockchain networks (BN) to ensure that all the nodes in the network come to an agreement. In a decentralized system there is no central authority to check the transactions or maintain the ledger and this is the reason consensus algorithms are used to ensure that every participant trusts the data. The most common consensus algorithms include:

• Proof of Work (PoW): Is one of the first consensus mechanisms and the most popular one of them, which is used by Bitcoin. In PoW, the participants commonly referred to as miners work to solve hard mathematical problems to ensure that transactions are legitimate and new blocks are added. This process is very complex and time-consuming and the first miner to crack the code gets to add the block to the chain and is rewarded with cryptocurrency.
• Proof of Stake (PoS): This was born out of the need to solve some of the issues that exist with PoW. In PoS, validators are chosen based on the number of coins they hold and the number of coins they wish to put on the line, or ‘stake’. This nullifies the need for complex mining activities, hence making PoS much more energy efficient compared to other models.
• The delegated proof of stake (DPoS): Is a subsequence of PoS where the token holders cast their votes for a bunch of block creators and validators to validate block creation and network operations. DPoS is very democratic in nature as it gives the participants a chance to decide who will be validating the transactions.
• Practical Byzantine Fault Tolerance (PBFT): This is also used by blockchain networks to reach consensus among nodes even when some of those nodes are faulty or malicious. PBFT is well suited in permissioned BN where the members in the network are well-known and can be trusted. This is achieved through the use of nodes which have to share information and come up with the state of the network through voting.

2. Cryptographic Algorithms

The use of cryptographic algorithms is to provide the security and integrity of data on the blockchain as well as the privacy of the data. They allow for safe and secure transactions, user information protection and also help to avoid any alterations to the data. The key cryptographic algorithms used in blockchain systems include:

• Hashing Algorithms: This is a cryptographic function that takes set of input with no specific size and produces a set of output with a predetermined size referred to as hash value. This means the data is unique and hard to alter since a slight alteration of the input will generate another completely different hash. The data transmitted in blockchains is secured and linked together in blocks with the help of hashing algorithms such as SHA-256 used by Bitcoin.
• Encryption Algorithms: These are used in the blockchain to secure the information through conversion of the information into some code that can be understood by the authorized person only. This is because encryption makes it a bit impossible for anyone to decipher the data even if they are able to intercept it unless they have the decryption key.
• Digital Signatures: Are a cryptographic method that is employed in the authentication of transactions that take place on the blockchain. They confirm, that each transaction is authorized by the holder of the private key linked to the public key (address) used in the transaction.

Importance of Blockchain Algorithms

Algorithms form the core of the decentralized networks and this can be seen with the emergence of blockchain. They guarantee that the transactions are secure, legal, and are done in the most proper way while at the same time protecting the blockchain. Key benefits of blockchain algorithms include: 

• Decentralization: Smart contracts eliminate the need for go-betweens thus enabling direct communication among the participants within the block-chain.
• Security: Algorithms such as cryptography make sure that the information contained in the block chain cannot be changed or manipulated in any way.
• Scalability: PoS and DPoS are some of the Consensus algorithms that help in solving the scaling issues to enable the blockchain networks to accommodate a large number of transactions.

Conclusion

Algorithms are the core of any decentralized system since they ensure that operations are done in the right manner, in a secure and efficient way. Starting from the validation of the transactions that take place in a particular network to the cryptographic algorithms that are used to secure data within the network, these algorithms are critical to the proper functioning of BN. Over time, the algorithms behind the blockchain will also improve, thus allowing distributed systems to be more secure and efficient in the future.