This document discusses different consensus mechanisms for distributed ledger technologies, including blockchain. It provides examples of proof-of-work (PoW), proof-of-stake (PoS), Byzantine fault tolerance (BFT), federated, and crypto-based consensus approaches. The document examines the properties of each, such as requirements, scalability, transaction finality, and decentralization. It questions whether consensus protocols and distributed shared ledgers are always needed, suggesting alternative approaches based on smart contracts and identity management without a shared ledger may be more efficient.

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The Blockchain land:
Is there Consensus over Consensus?
Vasily Suvorov, VP Technology Strategy
March 18, 2016

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Can we talk about blockchain
without the Hype?

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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

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Consensus is the most fundamental part of the DLT/Blockchain tech
and yet
poorly understood

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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?
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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.
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Let’s Use Pictures Instead!
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PoW – Consensus for a Censorship Resistant Network
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• 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?

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PoS – Scalable Consensus for Public & Private Ledgers
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• 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?

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BFT/Federated – Fast Consensus with Finality
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• 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?

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Identity/Crypto-Based – Distributed Ledgers without a
Ledger
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• 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

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Consensus techniques – Overview
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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*

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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

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Blockchains are inefficient
databases!
The Big Question!
Shall we just go with distributed, crypto based ”Smart Contracts” ?

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Thank You!
&
Questions?