Blockchain technology is progressively taking over the business world. The technology was once considered to be confined to bitcoins. But with time, it has proved that bitcoin is just the tip of the iceberg; the potential of the technology is beyond decentralized transactions and even our expectations. Blockchain technology revamped several industries, including Real Estate, Healthcare, Education, and Legal industry to name a few. It opened new doors of opportunities and profit for the entrepreneurs and established brands. However, the most surprising application of Blockchain is in the mobile app economy.
Wondering what is the need of Blockchain technology in the mobile industry? How can Blockchain revolutionize the world of mobile applications?
The mobile economy is undoubtedly growing rapidly and is expected to be of worth $6.3 trillion by 2021. The app stores are jammed with millions of apps and both the app developers and users are getting access to better facilities. However, despite this exponential growth and technological innovations, the mobile application development economy is still facing various issues which cannot be overlooked.
Major Mobile Economy Concerns and How Blockchain Technology Can Solve Them
Alike other centralized systems, the mobile economy also involves various intermediaries between the mobile app developers and users. These entities help in discovery, distribution, and financial transactions but at the same time, deters transparency. As a result, we face situations like security threats, inaccessible in-app purchases, data leaks, and malware-plagued downloads which not only have an adverse impact on the user experience but also affect the mobile app performance and ROI.
As we saw in our Entrepreneur’s Guide to Blockchain, the technology, with its decentralized, distributed and secure ledger feature, has the potential to revamp the way app economy functions and make the end user experience seamless and enticing. If applied correctly, blockchain can tackle the following major concerns related to mobile app economy:
App Approval
With Google and Apple’s app store being the duopoly, the current app approval process is completely handled by them. They decide which mobile app will be published on their app store and which not, based on various non-transparent quality assurance processes and distribution policies. This not only makes the process cumbersome and time-consuming but also increases the confusion among mobile app developers in case of app rejection. On the flip side, less transparency app approval process raises the risk of distribution of malware-plagued apps by the users, and thus, lesser security in the app market. With the introduction of Blockchain technology into the process, the app approvals can be made universal and transparent through a developer reputation system. The reputation system will be directly linked to the financial transactions on the public ledger and will be available for investigation all the time (as you can see in the image below). Besides, various means will be employed for identity verification and users will be empowered to create rankings for the mobile app developers and the apps they create. This will streamline the app approval process and help the smartphone users take the decision of downloading the app based on the ranking (see the image below), which will ultimately build trust, enhance security, boost downloads, and uplift app revenue.
Advertising
According to Statista, there are more than 2.8 million apps in Google Play Store and about 2.2 million apps in the Apple’s App Store. To reach the target audience and enjoy the limelight, the mobile app developers have to invest in CPI, i.e., Cost Per Installation campaigns. These campaigns are non-transparent and overpriced, which makes the situation shady and risky. Moreover, as you can see in the picture below, the profit gained by the mobile application developers from the advertising is divided and shared to middlemen because of which the developers get much lesser earnings than expected.
Blockchain technology can reinvent the advertising method by eliminating all the middlemen and establishing a new CPI campaign. Termed at CPA (Cost per attention), this campaign will let the mobile application developers directly reward the users for spending time on their mobile app (as you can see in the image below).
Blockchain technology, in the form of Smart contracts, will allow the developers to examine if the users spent required time on their app or not. Apart from this, the technology will let the users store their earnings in wallets and use to buy in-app items efficiently.
In-App Purchase
A recent report by We Are Social and Hootsuite revealed that nearly two-thirds of the world’s population uses a smartphone now. However, only 2 billion of the mobile users have access to the payment methods that are necessary for in-app purchases. Apart from this, according to the traditional app in-app process system, the user pays to the app store, deal with the bank transfer fees, credit card fraud cases, circumstances of chargebacks, and so on. Then, the mobile app developer receives the payment from app store going through the same hassle. The consequence is that neither the end users are able to enjoy the perks of in-app purchase nor app developers are able to get the best out of their app monetization strategy (check the image below). Blockchain technology will let the mobile app users use and spend their CPAt reward even in the absence of credit card and other such payment solutions. In addition to this, the Blockchain will empower mobile application developers to get 85% instead of 70% of transaction value by eliminating the middlemen (as shown in the image below).
Other Applications of Blockchain in the Mobile Industry
Apart from solving the aforementioned concerns, blockchain technology will also generate new ways to streamline the mobile application development process and cater user needs significantly, such as:
Infrastructure Protection
By gathering DNS entries on a decentralized secure platform, the blockchain technology empowers the app developers to keep the whole domain records under their control – no one can alter the entries without their consent.
End of Passwords
By investing in Blockchain app development, the app developers will be able to authenticate devices as well as users without asking for any password. Its network decentralization feature will help create consensus among the involved parties for the authentication of Blockchain based SSL certificates. This will ease the transaction process and again, boost trust among the two involved parties.
The Blockchain technology, though in its initial state now, will redefine the mobile app economy and offer the opportunities to the mobile app developers and users that they have been waiting years for. The technology will solve the three major concerns associated with the mobile economy, will build a trustable and transparent connection, and provide an open-standard platform where all could communicate and add value to the mobile world.
Properties of a Good Blockchain Consensus Mechanism
Consequences of Relying Upon a Bad Consensus Protocol
Blockchain Consensus Algorithms that are Popular in the Market
Proof of Work (PoW)
Proof of Stake (PoS) and Its Variations
Byzantine Fault Tolerance (BFT) and Its Derivatives
Direct Acyclic Graph (DAG)
Proof of Capacity (PoC)
Proof of Burn (PoB)
Proof of Identity (PoI)
Proof of Activity (PoA)
Proof of Elapsed Time (PoET)
Proof of Importance (PoI)
What is Blockchain Consensus Algorithm?
The simplest answer to what is Blockchain consensus algorithm is that it is a procedure via which all the peers of a Blockchain network reaches to a common acceptance or consensus about the real-time state of the distributed ledger.
A consensus mechanism enables the blockchain network to attain reliability and build a level of trust between different nodes, while ensuring security in the environment. This is the reason why it is one of the vital parts of every Blockchain app development guide and every dApp project in the distributed ledger environment.
These algorithms operate on the ground of different objectives, a few of which we will be covering in the next section of this article.
Objectives of Blockchain Consensus Mechanism
1. Unified Agreement
One of the prime objectives of consensus mechanisms is attaining unified agreement.
Unlike centralized systems where having a trust on the authority is necessary, users can operate even without building trustin on each other in a decentralized manner. The protocols embedded in the Distributed blockchain network ensures that the data involved in the process is true and accurate, and the status of the public ledger is up-to-date.
2. Align Economic Incentive
When it comes to building a trustless system that regulates on its own, aligning the interests of participants in the network is a must.
A blockchain consensus protocol, in this situation, offers rewards for good behavior and punish the bad actors. This way, it ensures regulating economic incentive too.
3. Fair & Equitable
Consensus mechanisms enable anyone to participate in the network and using the same basics. This way, it justifies the open-source and decentralization property of the blockchain system.
4. Prevent Double Spending
Consensus mechanisms works on the basis of certain algorithms that ensures that only those transactions are included in the public transparent ledger which are verified and valid. This solves the traditional problem of double-spending, i.e, the problem of spending a digital currency twice.
5. Fault Tolerant
Another characteristic of Consensus method is that it ensures that the blockchain is fault-tolerant, consistent, and reliable. That means, the governed system would work indefinite times even in the case of failures and threats.
Currently, there are a plethora of Blockchain consensus algorithms in the ecosystem and many more are heading to enter the marketplace. This makes it imperative for every Blockchain development company and enthusiastic Entrepreneur to be familiar with the factors that defines a good consensus protocol, and the possible effect of going with a poor one.
So, let’s begin with determining what makes a Blockchain consensus a good one.
Properties of a Good Blockchain Consensus Mechanism
1. Safety
In a good consensus mechanism, all the nodes are capable of generating results that are valid according to the rules of protocol.
2. Inclusive
A good consensus mechanism ensures that every particular node of the network participates in the process of voting.
3. Participatory
A consensus mechanism where all the nodes actively participate and contribute to updating database on Blockchain is called a Good consensus model.
4. Egalitarian
Another trait of a good mechanism is that it gives equal value and weightage to every vote received from the node.
With this attended to, let’s find out what happens when you do not consider these factors and introduce a poor consensus model to your development process.
Consequences of Choosing a Bad Consensus Protocol
1. Blockchain Forks
Choosing a poor blockchain consensus method increases the vulnerability of the chain. One such vulnerability that is faced by the blockchain enthusiasts and developers is Blockchain Forks.
Blockchain forks, in a layman language, is a situation or circumstances under which a single chain diverges into two or more. A detailed explanation about Blockchain fork and its types is available in the video embedded below.
When a Blockchain fork occurs, the application begins operating in an unpredictable manner, creating two or more diverged nodes ahead.
2. Poor Performance
When a bad consensus mechanism is considered, either the node gets malfunctioned or suffer from network partition. This delays the process of exchanging messages between nodes and increases the latency of the application, which ultimately lowers down the performance level.
3. Consensus Failure
Another effect of incorporating a bad consensus mechanism to your business model is consensus failure. In this situation, a fraction of nodes fails to participate in any process and thus, in the absence of their votes, the consensus fails to deliver accurate and desired outcomes.
With the basics of Blockchain consensus methods now covered, let’s dive deeper into the topic and look at the popular types of consensus mechanism.
Blockchain Consensus Algorithms that are Popular in the Market
1. Proof of Work (PoW)
Developed by Satoshi Nakamoto, Proof of Work is the oldest consensus mechanism used in the Blockchain domain. It is also known as mining where the participating nodes are called miners.
In this mechanism, the miners have to solve complex mathematical puzzles using comprehensive computation power. They use different forms of mining methods, such as GPU mining, CPU mining, ASIC mining, and FPGA mining. And the one that solves the problem at the earliest gets a block as a reward.
However, the process is not that easy. A puzzle can be solved only via trial and error method. Additionally, the level of complexity of the puzzle increases with the speed at which blocks are mined. So, it becomes mandatory for one to create a new block within a certain time frame to cope up with the difficulty level.
The Proof of Work mechanism is used by multiple cryptocurrencies like Bitcoin, Litecoin, ZCash, Primecoin, Monero, and Vertcoin to name a few.
In terms of its implementations, the Proof of Work (PoW) has not only influenced the financial industry, but also healthcare, governance, management and more. It has, in fact, offered the opportunity of multichannel payments and multi-signature transaction over an address for enhancing security.
2. Proof of Stake (PoS)
Proof of Stake is the most basic and environmentally-friendly alternative of PoW consensus protocol.
In this blockchain method, the block producers are not miners, but they act like validators. They get the opportunity to create a block over everyone which saves energy and reduces the time. However, for them to become a validator, they are supposed to invest some amount of money or stake.
Also, unlike that in the case of PoW, miners are provided with a privilege to take their transaction fees in this algorithm for there is no reward system in this consensus model.
This, as a whole, encouraged brands like Ethereum to upgrade their model from PoW to PoS in their Ethereum 2.0 update. Also, it helped various Blockchain ecosystem like Dash, Peercoin, Decred, Reddcoin, and PivX to function properly.
Now, while PoS solved various issues earlier associated with PoW, there were many challenges still undusted in the market. To mitigate those challenges and deliver an enhanced blockchain environment, several variations of PoS came into existence.
The two popular variations of Proof of Stake (PoS) are DPoS and LPoS.
Delegated Proof of Stake (DPoS)
In the case of Delegated Proof of Stake (DPoS), the participants stake their coin and vote for a certain number of delegates such that the more they invest, the more weightage they receive. For example: if user A spends 10 coins for a delegate and user B invests 5 coins, A’s vote gets more weightage than that of B.
The delegates also get rewarded in the form of transaction fees or certain amount of coins.
Because of this stake-weighted voting mechanism, DPoS is one of the fastest blockchain consensus models and highly preferred as a digital democracy. Some of the real-life use cases of this blockchain consensus mechanism are Steem, EOS, and BitShares.
Leased Proof of Stake (LPoS)
LPoS is an enhanced version of PoS consensus mechanism that operates on the Waves platform.
Unlike the regular Proof-of-Stake method where each node with some amount of cryptocurrency is entitled to add the next blockchain, users can lease their balance to full nodes in this consensus algorithm. And the one that leases the bigger amount to the full node have a higher probability of generating the next block. Also, the leaser is then rewarded with a percentage of transaction fee that has been collected by the complete node.
This PoS variant is an efficient and safe option for the development of public cryptocurrencies.
3. Byzantine Fault Tolerance (BFT)
Byzantine Fault Tolerance, as the name suggests, is used to deal with Byzantine fault (also called Byzantine Generals Problem) – a situation where the system’s actors have to agree on an effective strategy so as to circumvent catastrophic failure of the system, but some of them are dubious.
Learn more about the Byzantine Generals Problem through this video:-
The two variations of BFT consensus model that are prime in the Blockchain arena are PBFT and DBFT.
Practical Byzantine Fault Tolerance (PBFT)
PBFT is a lightweight algorithm that solves the Byzantine General’s problems by letting users confirm the messages that have been delivered to them by performing a computation to evaluate the decision about the message’s validity.
The party then announces its decision to other nodes who ultimately process a decision over it. This way, the final decision relies upon the decisions retrieved from the other nodes.
Stellar, Ripple, and Hyperledger Fabric are some of use cases of this blockchain consensus mechanism.
Delegated Byzantine Fault Tolerance (DBFT)
Introduced by NEO, the Delegated Byzantine Fault Tolerance mechanism is similar to DPoS consensus model. Here also, the NEO token holders get the opportunity to vote for the delegates.
However, this is independent of the amount of currency they invest. Anyone who fulfills the basic requirements, i.e, a verified identity, right equipment, and 1,000 GAS, can become a delegate. One among those delegates is then chosen as speaker randomly.
The speaker creates a new block from the transaction that is waiting to be validated. Also, he sends a proposal to the voted delegates who have the responsibility to supervise all the transactions and record them on the network. These delegates have the freedom to share and analyze the proposals to check the accuracy of data and honesty of the speaker. If, then, 2/3rd of the delegates validates it, the block is added to the blockchain.
This type of Blockchain consensus protocol is also called ‘Ethereum of China’ and can be a helpful resource in building a ‘smart economy’ by digitising assets and offering smart contracts on the blockchain.
4. Direct Acyclic Graph (DAG)
Another basic yet prime blockchain consensus model that every mobile app development services company working with Blockchain must be familiar with is DAG.
In this type of Blockchain consensus protocol, every node itself prepares to become the ‘miners’. Now, when miners are eradicated and transactions are validated by users itself, the associated fee reduces to zero. It becomes easier to validate transactions between any two closest nodes, which makes the whole process lightweight, faster, and secure.
The two best examples of DAG algorithm are IOTA and Hedera Hashgraph.
Though these are the prime consensus models in the development environment, many different blockchain consensus mechanisms have slowly and gradually starting gaining momentum, such as:-
5. Proof of Capacity (PoC)
In the Proof of Capacity (PoC) mechanism, solutions for every complex mathematical puzzle is accumulated in digital storages like Hard disks. Users can use these hard disks to produce blocks, in a way that those who are fastest in evaluating the solutions get better chances for creating blocks.
The process it follows is called Plotting. The two cryptocurrencies that relies on PoC blockchain consensus protocol are Burstcoin and SpaceMint.
6. Proof of Burn (PoB)
Considered an alternate solution to PoW and PoS in terms of energy consumption, Proof of Burn (PoB) consensus model works on the principle of letting miners ‘burn’ or ‘ruin’ the virtual cryptocurrency tokens, which further provides them with a privilege to write blocks in proportion to the coins. The more coins they burn, the more are the chances of picking the new block for every coin they get.
But, in order to burn coins, they are required to send it to the address where it couldn’t be spent for verifying the block.
This is widely employed in the case of distributed consensus. And the finest example of this consensus mechanism is the Slim coin.
7. Proof of Identity (PoI)
The concept of PoI (Proof of Identity) is just like that of the authorized identity. It is a piece of cryptographic confirmation for a users’ private key that is being attached to each particular transaction. Each identified user can create and manage a block of data that can be presented to others in the network.
This blockchain consensus model ensures authenticity and integrity of the created data. And thus, is a good choice for introducing in smart cities.
8. Proof of Activity (PoA)
PoA is basically a hybrid approach designed through the convergence of PoW and PoS blockchain consensus models.
In the case of PoA mechanism, miners race to solve a cryptographic puzzle at the earliest using special hardware and electric energy, just like in PoW. However, the blocks they come across holds only the information about the identity of block winner and reward transaction. This is where the mechanism switches to PoS.
The validators (shareholders appointed to validate transactions) test and ensure the correctness of the block. If the block was checked many times, the validators activate to a complete block. This confirms that open transactions are processes and are finally integrated into the found block containers.
Besides, the block reward is divided so that validators gain shares of it.
The two real-world implementation of this mechanism are Espers and Decred coins.
9. Proof of Elapsed Time (PoET)
PoET was introduced by Intel with an intent to take over cryptographic puzzles involved in PoW mechanism by considering the fact that the CPU architecture and the quantity of mining hardware knows when and at what frequency does a miner win the block.
It is based on the idea of fairly distributing and expanding the odds for a bigger fraction of participants. And so, every participating node is asked to wait for a particular time to participate in the next mining process. The member with the shortest hold-up time is asked to offer a block.
At the same time, every node also come up with their own waiting time, after which they go into sleep mode.
So, as soon as a node gets active and a block is available, that node is considered as the ‘lucky winner’. This node can then spread the information throughout the network, while maintaining the property of decentralization and receiving the reward.
10. Proof of Importance (PoI)
Introduced by NEM, PoI is a variation of PoS protocol that considers the role of shareholders and validators for its operation. However, this is not only influenced by the size and chance of their shares; various other factors like reputation, overall balance, and no. of transactions made through any particular address also plays a role in it.
The networks based on POI consensus model are expensive to attack on and rewards users for contributing to the network’s security.
The information shared so far would have helped you in differentiating the varied Blockchain consensus protocols.
However, to simplify it for you, here’s a blockchain consensus algorithms comparison table.
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