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Byzantine Fault Tolerance in Crypto: What Is It?

Blockchain on an orange background
— Decentralized systems must manage themselves and thus need robust security measures to prevent malicious and false transactions.

— A blockchain that can sort valid transactions from fraudulent ones, is said to have solved the Byzantine Generals’ problem, and is therefore, Byzantine Fault Tolerant.

— Blockchains solve the Byzantine Generals’ Problem with consensus mechanisms such as Proof-of-work and Proof-of-stake.

The revolutionary idea behind decentralized, permissionless networks is that theoretically, anyone can join one. Indeed, decentralization as a philosophy promises to remove the influence of centralized gatekeepers, opening up whole industries to those who might’ve otherwise been denied access. Blockchains achieve this through a distributed system of computer nodes verifying transactions and reaching consensus, enabling decentralized networks to operate without a central party or intermediaries.

Of course, without centralized power structures, decentralized systems need robust security measures. After all, if anyone can join and participate in a network, how do we ensure all network participants act honestly?

This is where Byzantine Fault Tolerance (BFT) comes into play. But what is Byzantine Fault Tolerance and what does it have to do with crypto? Let’s find out.

What is Byzantine Fault Tolerance (BFT)?

In crypto, Byzantine Fault Tolerance (BFT) refers to the ability of a decentralized network to pick out and reject false information. BFT is critical for network integrity. Without it, network participants could introduce false information. BFT also allows networks to continue functioning even when nodes become faulty or malicious.

Specifically, a system is considered Byzantine Fault Tolerant if it solves the Byzantine Generals’ Problem. So what is that exactly?

What Is The Byzantine Generals’ Problem?

The Byzantine Generals’ Problem is a logical dilemma first posed by Robert Shostak, Leslie Lamport, and Marshall Pease in 1987. It’s expressed through the following military metaphor: 

A group of generals surrounds a city, deliberating whether to attack or retreat. The only way for the generals to communicate with one another is via messages. However, these messages are vulnerable to being intercepted by the city defenders, making it hard to detect if they are real or fake. 

Despite the possibility that some of the messages they receive could be fake, the generals must still find a way to come to a decision – i.e. reach a consensus – and act on it. Furthermore, the generals must attack all at once to succeed; if they attack at different times, they fail.

Byzantine Fault Tolerance in Blockchain

All decentralized blockchains should solve the Byzantine Generals’ Problem. In this context, instead of generals reaching consensus, we have nodes; the decision to attack or retreat represents the current state of the network. 

A Byzantine failure occurs when the system cannot tell faulty nodes and functioning nodes apart and thus, confuses valid and fraudulent transactions. To avoid failure, a majority of the nodes in a network must reach consensus. This prevents problems like the same token from being spent twice, aka double-spending.

This is why consensus mechanisms are so pivotal to blockchains. Their role is primarily to create incentives strong enough to keep network participants working in the interests of the network, and to discourage participants from acting maliciously.

How Does Byzantine Fault Tolerance Work?

Each consensus mechanism aims to solve the Byzantine generals’ problem in a slightly different way. So, let’s look at some of the most popular consensus mechanisms and how they approach the problem.

Byzantine Fault Tolerance in Proof-of-Work Networks (such as Bitcoin)

Satoshi Nakamoto laid out the Proof-of-Work (PoW) consensus mechanism in the Bitcoin whitepaper

The nodes that verify transactions and create blocks in a PoW system are called miners. When it’s time to add a new block to the blockchain, miners compete to solve computational problems. The answer to each problem provides the miner with a hash. These hashes prove that a miner has done the work to create the block, allowing nodes to verify the block’s validity. Once the nodes reach consensus, the block is added to the chain.  

To solve these complex problems, miners must invest in and maintain highly specialized hardware, which also requires a lot of energy to run consistently. These expenses incentivize miners to act in the interests of the network.

Byzantine Fault Tolerance in Proof-of-Stake Networks (such as Ethereum)

Proof-of-stake (PoS) is another example of a consensus mechanism that solves the Byzantine Generals’ Problem.

In this case, network validators must lock up a significant amount of cryptocurrency to have the ability to verify transactions and create blocks, a mechanism called staking. This makes it financially infeasible to cheat the system. For example, validators on the Ethereum network must stake 32ETH – much more cryptocurrency than most people have to spare.

Many proof-of-stake networks also introduce methods of punishment for malicious or malfunctioning nodes. With slashing, validators stand to lose their stake if they fail to perform their role.

All variants of the proof-of-stake consensus mechanism will be byzantine fault tolerant, including nominated proof-of-stake (NPoS) and Delegated proof-of-stake (DPoS).

Other examples of consensus mechanisms that provide BFT include Proof-of-authority (PoA), and Proof-of-identity (PoI).

Final Thoughts on BFT in Crypto

Byzantine fault tolerance is critical for public blockchains, as it is the key to a corruption-proof blockchain. Without these sorts of mechanisms, you’d have no idea if a block is valid. This opens up the risk of double-spending, which undermines the security of the entire network. In short, byzantine fault tolerance is extremely important for all public blockchains. 

When it comes to crypto, security is of the utmost importance, whether that’s on the level of a whole network, or the personal level. And for anybody serious about their security in crypto, the only true solution is self-custody. So why not pick up a Ledger device and enjoy the peace of mind that comes from securing your digital assets? After all, if not self-custody, then why crypto?

Want to know more about how blockchains work? Take the Ledger Quest on Blockchain Basics and receive a free Proof of Knowledge NFT!

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