Challenges in Consensus Mechanism in Blockchain Explained

In the previous section, you learnt about the challenges that are there in the existing consensus mechanism. In this section, we will take a closer look at those challenges and the problems they create. Let's first learn about an important concept in the process of mining known as "Pool Mining" in the upcoming video.

In Bitcoin, a lot of miners can come together and form a pool known as mining pool where they compute the block hash together. The mining pool divides the nonce value into different ranges, and all the miners calculate the hash within the assigned range. This makes the mining process much faster, and less computational power is required for the process of mining to be carried out. 

The major challenge with pool mining is that it creates a monopoly in the network and only specified nodes get the reward. In case the mining pool exceeds 51% of the network strength, the miners can derail the network from its original intent and tamper with the data as their data could get accepted by the majority rule.

The miners can create "forks" of the existing blockchain and add tampered transactions to the network. Let's hear from Shebin more about these.

Proof of work faces three major challenges:

a. It is energy inefficient: In proof of work millions of miners try to mine one block, and only one miner is successful. Rest of the energy spent by the miners goes to waste.

b. It is computationally heavy: Proof of work requires a lot of computation by the miners to mine one block successfully.

c. 51% attack: In case more than 51% of the nodes in the network are malicious the network could become unstable.

Bitcoin follows the longest chain rule which states that in case the blockchain branches out into multiple branches, the longest branch is accepted by the network. The branches are known as forks. 

In case there 51% of the network comes together to form a mining pool they can create the longest chain with faulty transactions as they are computationally superior, thus making the network unstable.