Comparing Harmony’s Effective Proof Of Stake To Other Mechanisms

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Harmony

4 min readJun 17, 2022

In any centralized process, there is a central administrator or authority that continuously updates the database. However, as blockchain technology is decentralized, it is powered by self-regulating systems that use different consensus mechanisms to update the database. A consensus mechanism is a network of computers essential to safeguard the software from malicious actors.

Each cryptocurrency has its own consensus mechanism that keeps the verification process running. While Bitcoin and Ethereum use the Proof of Work (PoW) consensus mechanism, Ethereum 2.0 will transition to Proof of Stake (PoS). Harmony, on the other hand, uses Fast Byzantine Fault Tolerance (FBFT) consensus algorithm. FBFT allows at least 250 validators to reach consensus within 2 seconds.

Complementing FBFT, Harmony uses the Effective Proof of Stake (EPoS) staking mechanism, the first staking mechanism in a sharded blockchain that achieves both security and decentralization

Here’s how Proof of Work, Proof of Stake, and Harmony’s Effective Proof of Stake work.

What is Proof of Work (PoW)?

The Proof of Work consensus mechanism involves verifying transactions between users and adding them to the blockchain. The consensus mechanism requires miners to undergo a complex mining process and spend a considerable amount of processing power. It uses the SHA-256 hash function that provides a fair input.

Simply, miners race to complete the cryptographic puzzle by using mining equipment (ASICs) and other computing devices to help them fetch rewards. PoW is a potent consensus mechanism in terms of power and security. It consumes high electricity and hence is known as an energy-intensive mechanism. However, the PoW mechanism brings a high degree of trust to the system.

What is Proof of Stake (PoS)?

The Proof of Stake consensus mechanism is an updated version of PoW that doesn’t require intensive mining operations. Instead, the PoS mechanism involves stakers using their blockchain holdings to add blocks to the blockchain.

Therefore, users can only participate in the consensus if they have the underlying cryptocurrency. The protocol then applies the consensus on the block for all nodes to agree to add the following block to the blockchain. Hence, the node is responsible for verifying the transactions’ validity, signing, and proposing it to the network.

A specific user has to stake (or lock) their crypto tokens in a smart contract. Generally, the higher coins you stake, the higher your chances of becoming the next block producer. PoS and PoW nodes both receive rewards in the form of tokens when proposing a new block.

What is Effective Proof of Stake (EPoS)?

The Effective Proof of Stake (EPoS) staking mechanism builds upon PoS to achieve both security and decentralization, making it the first staking mechanism in a sharded blockchain to do so. EPoS allows staking from hundreds of validators and elects the highest-ranked validators based on stakes. The model does not incentivize stakers with a high stake to avoid stake centralization. With the introduction of effective stake, the higher ranked validators are actually economically punished to stake too much in a single validator and the lower-ranked validators are enjoying extra reward for their stake.

To safeguard the blockchain against stake centralization, the unique EPoS model also introduces a slashing mechanism. If stakers plan to attack the blockchain by double signing conflicting blocks, the validator will be slashed and forever banned from the network. The slashing rate increases linearly with the number of validators, with a minimum of 2%. Therefore, if half of the validators double sign conflicting blocks, the slashing rate will be 50%.

You can read more about Harmony’s Effective Proof of Stake in our official doc section.

Here’s a brief comparison between Harmony’s EPoS, and Cosmos and Ethereum 2.0’s PoS.

The Need for A Newer Consensus Mechanism

The widely used consensus mechanisms PoW and PoS pose certain problems that need to be addressed. However, since PoS is an updated version of the PoW mechanism, the solution narrows down to improving the problems with the former mechanism.

The PoS blockchains form a group of validators that validate blocks. The problem with creating a group is the idea of limited seats and whom to grant the seat. The standard methods that blockchains use are social reputation, random selection, or staking quantity. However, the most secure way is to use staked tokens as it closely ties the validator’s incentives with the blockchain.

The Effective Proof of Stake mechanism solves the above problem, and more with easy compounding, avoiding uneven stake, and supporting delegation. This scales both security and decentralization, promoting an overall healthy blockchain ecosystem. You can also join the ecosystem by becoming a validator or delegator, and start staking at Harmony.

About Harmony

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Harmony is an open and fast blockchain. Our mainnet runs Ethereum applications with 2-second transaction finality and 100 times lower fees.

Harmony is your open platform for assets, collectibles, identity, governance. Our secure bridges offer cross-chain asset transfers with Ethereum, Binance and 3 other chains.

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