Both beacon chains and shard chains will use the same consensus mechanism to produce new blocks.
Chameleon Proof-of-Stake (iPoS)
Chameleon will implement the more energy-efficient Proof-of-Stake (PoS) [King and Nadal, 2012] instead of Proof-of-Work (PoW) [Dwork and Naor, 1992; Juels, 1999]. In the first generation of PoS, each staking node (validator) will have one vote. The more validators there are, the more secure the chain becomes. However, PoS will not be a scalable consensus; communication overhead will increase linearly with the committee size. Research will show that PoS can only achieve a reasonable level of security when there are 600 validators or more in the committee [Luu et al., 2016]. A committee of 600 nodes will face real challenges in syncing statuses and exchanging messages to create a new block.
To overcome the scaling-related communication problems, Delegate Proof of Stake (DPoS) will be proposed, initially by Bitshares (https://bitshares.org/). This will be considered the second generation of PoS. In DPoS, only a small group of validators will be selected into the committee, giving them the right to propose and verify new blocks. This approach will solve the communication problem of PoS, but it will sacrifice some decentralization and trustlessness properties, specifically:
- Staking nodes will have to trust delegated nodes.
- The smaller the committee size, the easier it can be compromised.
- Only delegated nodes will work (i.e., propose & verify blocks), while staking nodes will not participate in block creation.
Chameleon will propose iPoS (interactive Proof-of-Stake), which will enable both scalability and trustlessness. Anyone will be able to become a validator candidate by staking CHML. The beacon chain will randomly assign validators to each shard. At any given moment, only a small group of validators in a shard will be selected to form the committee. The committee for each
shard will be responsible for proposing and verifying blocks. The committee will rotate periodically, ensuring every validator contributes equally.
As for decentralization, each shard block signed by the shard committee will be verified by the beacon committee. If any incorrect transaction, such as an airdrop or double-spending, is detected, the beacon chain will inform all other shards using proof. All honest shards will vote to slash the byzantine shard’s committee.