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Introduction to Consensus techniques

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Slides from my talk at CryptoMountain event in Davos. This is a less technical version of my slides on consensus algorithms for blockchain and distributed ledger technology

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Introduction to Consensus techniques

  1. 1. www.luxoft.com The Blockchain land: Is there Consensus over Consensus? Vasily Suvorov, VP Technology Strategy March 18, 2016
  2. 2. www.luxoft.com 2 Can we talk about blockchain without the Hype?
  3. 3. www.luxoft.com What is Distributed Ledger Technology? (AKA Blockchain) Decentralized Data-Sharing Technology that:  Connects participants in a business ecosystem without a central entity or intermediary  Maintains real-time, add-only, unchangeable ledger and history of transactions  Automates business rules execution Made possible by a unique combination of Peer-to-peer communications, Strong encryption, Distributed consensus and Smart contracts
  4. 4. www.luxoft.com 4 Consensus is the most fundamental part of the DLT/Blockchain tech and yet poorly understood
  5. 5. www.luxoft.com What I’ll cover • What is consensus? • Examples of consensus mechanisms • PoW, PoS, Byzantine, Federated and Crypto-Based • The Big Question • Do we need Consensus Protocols and Distributed Shared Ledgers? 5
  6. 6. www.luxoft.com 6
  7. 7. www.luxoft.com Back to School Time! Byzantine Agreement Protocol. In a synchronous network, let P be a n-player protocol, whose player set is common knowledge among the players, t a positive integer such that n ≥ 2t + 1. We say that P is an arbitrary-value (respectively, binary) (n, t)-Byzantine agreement protocol with soundness σ ∈ (0, 1) if, for every set of values V not containing the special symbol ⊥ (respectively, for V = {0, 1}), in an execution in which at most t of the players are malicious and in which every player i starts with an initial value vi ∈ V , every honest player j halts with probability 1, outputting a value outi ∈ V ∪{⊥} so as to satisfy, with probability at least σ, the following two conditions: 1. Agreement: There exists out ∈ V ∪ {⊥} such that outi = out for all honest players i. 2. Consistency: if, for some value v ∈ V , vi = v for all honest players, then out = v. 7
  8. 8. www.luxoft.com Let’s Use Pictures Instead! 8
  9. 9. www.luxoft.com PoW – Consensus for a Censorship Resistant Network 9 • Ideal for Trustless Environments • Requires Cryptocurrency • Needs cheap electricity • Relies on Game Theory to align incentives • Highly scalable • Slow by design • Transaction finality is not immediate • Favors infrequent, high-value operations • Difficult to upgrade • Privacy? • Decentralization?
  10. 10. www.luxoft.com PoS – Scalable Consensus for Public & Private Ledgers 10 • Good for Low-Trust Environments • Requires Cryptocurrency • Relies on Complex Rules to align incentives • Highly scalable • Theoretically faster than PoW • Transaction finality is not immediate • Builds foundation for Governance • Microtransactions? • Privacy? • Decentralization?
  11. 11. www.luxoft.com BFT/Federated – Fast Consensus with Finality 11 • Requires higher level of trust / identity • Does not require a Cryptocurrency • Relies on multiple voting rounds • Scalability is limited • Faster than PoW or PoS • Transaction finality is immediate • Easy to govern and upgrade • Privacy?
  12. 12. www.luxoft.com Identity/Crypto-Based – Distributed Ledgers without a Ledger 12 • Requires a way to manage identities • Does not require a Cryptocurrency • Does not require a shared Ledger • Relies on Smart Contracts & Message Routing • Scalability is high • Fast • Transaction finality is immediate • Easy to govern and upgrade • Highest level of privacy
  13. 13. www.luxoft.com Consensus techniques – Overview 13 Network Size Throughput < 100 tx/s High Latency > 10K tx/s Network Latency < 20 nodes > 1000 nodes Stellar / Ripple IOTA Ethereum PoW Bitcoin POW Kadena Tendermint Symbiont Ethereum PoS*
  14. 14. www.luxoft.com Next Gen, Decentralized EDI Technology Making Smart Contracts Enforceable and Data Private • No Single Blockchain or DLT • History is maintained by Nodes, Flow(s) manage relationships between nodes • Histories can be connected, if deals are related • Notary & Oracle Services are defined • Sophisticated Identity Services • Smart Contracts iterate over state • Business process (Flow) updates a state • State transition (input > output) is logged • Multiple Fin related classes are pre-defined • Business prose (PDF) is attached • Consensus is pluggable • Notaries can be validating or not • Notaries can run a BFT or CFT (Raft) protocol • Notaries can be regional or global (Network Map) Party A Party B Notary Oracle Flow Flow Flow Flow Corda – network of Ledgers
  15. 15. www.luxoft.com Blockchains are inefficient databases! The Big Question! Shall we just go with distributed, crypto based ”Smart Contracts” ?
  16. 16. www.luxoft.com Thank You! & Questions?