Consensus is a state of agreement between the participants of a decentralized network. This means that the nodes on the network agree on the history and current state of the blockchain. State represents data such as the amount of CKBytes every user owns and which digital assets they have.
Nervos uses a Proof of Work (PoW) based consensus algorithm known as NC-MAX to achieve it. Many options were considered, and ultimately it was determined that Proof of Work (PoW) is still the best solution for a project as ambitious as Nervos, which requires a zero-compromise solution for consensus.
Proof of Stake (PoS) is one of the strongest contenders to PoW. The single greatest advantage PoS has is that it requires substantially less electricity to operate. However, PoW still offers several advantages over PoS:
- PoW mining is subject to external changes in technology, energy production, and regulation. This means that continued reinvestment is necessary to stay ahead of the competition, making long-term monopolization difficult.
- PoW does not give strong advantages to the early participants of the system. In PoS, rewards are attained completely deterministically, meaning there is no way for a late-comer to compete with an early participant.
- PoW is more simplistic and requires far fewer assumptions to be made. This means the potential for security holes is substantially lower.
- PoW chains cannot be turned on and off from a centralized point like PoS chains can -- ultimately leading to a truly decentralized network.
Building on Bitcoin’s Nakamoto Consensus, NC-MAX dramatically increases transactions per second and decreases confirmation time without compromising on security or decentralization. Nervos currently provides a 10x throughput increase compared to Ethereum and is expected to grow exponentially as layer 2 solutions are developed.
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