Byzantine Fault Tolerance in Crypto: What is it?

The revolutionary idea behind decentralized, permissionless networks is that, in theory, anyone can join. In fact, decentralization as a concept holds the promise of removing the influence of centralized gatekeepers, opening up entire industries to those who might otherwise be denied access. Blockchain accomplishes this through a distributed system of computer nodes that validate transactions and reach consensus, enabling decentralized networks to operate without a central party or intermediary.

Of course, without a centralized power structure, decentralized systems require strong security measures. After all, if anyone can join and participate in the network, how can we ensure that all network participants are acting 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 essential for network integrity. Without it, network participants could introduce false information. BFT also allows the network to continue to operate when nodes are faulty or malicious.

Specifically, a system is considered to have Byzantine Fault Tolerance if it solves the Byzantine Generals Problem. So what exactly is this?

What is the Byzantine Generals Problem?

The Byzantine Generals Problem is a logic puzzle first proposed by Robert Shostak, Leslie Lamport, and Marshall Pease in 1987. It is expressed through the following military metaphor:

A group of generals surrounded a city and discussed whether to attack or retreat. The only way for the generals to communicate is through messages. However, these messages can be easily intercepted by the defenders, and it is difficult to determine whether they are true or false.

Even though some of the information they receive may be false, the generals still have to find a way to make a decision - that is, reach a consensus - and take action. In addition, the generals must launch their attacks at the same time to succeed; if they attack at different times, they will fail.

Byzantine Fault Tolerance in Blockchain

All decentralized blockchains should solve the Byzantine Generals Problem. In this case, we have nodes, not generals reaching consensus; the decision to attack or retreat represents the current state of the network.

Byzantine faults occur when the system cannot distinguish between faulty nodes and functioning nodes, thereby confusing valid transactions with fraudulent transactions. To avoid faults, a majority of nodes in the network must reach a consensus. This prevents problems such as the same coin being spent twice (aka double spending).

This is why consensus mechanisms are so important to blockchains. Their role is mainly to create incentives strong enough for network participants to work for the benefit 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 take a look at some of the most popular consensus mechanisms and how they solve this problem.

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

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

In a PoW system, nodes that validate transactions and create blocks are called miners. When a new block needs to be added to the blockchain, miners compete to solve a computational problem. The answer to each problem gives the miner a hash value. These hashes prove that the miner has done the work of creating the block, allowing the nodes to verify the validity of the block. 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 continuously. These fees incentivize miners to act in the interest of the network.

Byzantine Fault Tolerance in Proof-of-Stake Networks Like 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 large amount of cryptocurrency in order to verify transactions and create blocks, a mechanism called staking. This makes it economically infeasible to cheat the system. For example, validators on the Ethereum network must stake 32ETH - much more cryptocurrency than most people can afford.

Many Proof-of-Stake networks also introduce methods of punishing malicious or faulty nodes. Through slashing, if validators fail to perform their duties, they lose their stake.

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 Cryptocurrency

Byzantine Fault Tolerance is essential for public blockchains as it is the key to a corruption-proof blockchain. Without these mechanisms, you would not know if a block is valid or not. This would create a risk of double spending, undermining the security of the entire network. In short, Byzantine Fault Tolerance is extremely important for all public blockchains.