Types of Blockchains
Consensus Mechanisms
The most common blockchains utilize Proof of Stake or Proof of Work consensus mechanisms. A consensus mechanism is a procedure network participants follow in order to verify that the state of the data being transmitted on the network is correct. Blockchains use consensus mechanisms to ensure that all network participants are in agreement on the data (transactions) being published on the decentralized public ledger. This is what enables crypto users to seamlessly transact without the need for a centralized authority.
Proof of Stake
Umee is a Proof of Stake blockchain. Other well known Proof of Stake blockchains include Cosmos Hub, Solana, Polkadot, and Cardano.
Proof of Stake (PoS) blockchains require network participants called "validators" to lock up crypto as collateral to ensure that they properly “validate” the data being included in a new entry on the distributed ledger. Validators are randomly selected to validate a block based on the amount of collateral they have locked up, or “staked,” hence the name “Proof of Stake.” Once a randomly selected validator validates a block, other validators verify its accuracy and the "block rewards," or newly minted units of crypto, are released.
Proof of Work
Bitcoin and Ethereum are two of the most well known blockchains that use a Proof of Work consensus protocol.
Proof of Work (PoW) blockchains require network participants called “miners” to compete to solve a mathematical puzzle in order to create a new "block" or data entry to the decentralized public ledger. It takes a lot of work in order to solve the puzzle, hence the name “Proof of Work.” Once a new block has been created, other network participants must verify its accuracy in order to add it to the ledger, at which point the participant who proposed the block earns “block rewards,” or newly minted units of cryptocurrency issued to network participants in return for their role in securing the network.
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