What is ‘Consensus mechanism’ in a blockchain?

The consensus mechanism is a crucial component of a blockchain project as it ensures the integrity and security of the network. It is responsible for reaching an agreement among all participants on the current state of the blockchain and the validity of new transactions. This is important for maintaining the trust and reliability of the blockchain network. In essence, consensus mechanisms are what impart the defining characteristics of a particular project/network. There are several types of consensus mechanisms that are used in different blockchain networks, each with its own strengths and weaknesses. The two most popular and widely used consensus mechanisms are: Proof of Works (PoW) & Proof of Stake (PoS) – more on them in detail, later.

This is just a simple primer on the consensus mechanisms I have heard of. I cannot guarantee that all of the below mechanism make sense! But anyways, here they are-

1. Proof of Work (PoW): This is the most widely used consensus mechanism, and is the foundation of the Bitcoin and Ethereum networks. PoW is a computational process that requires miners to solve complex mathematical problems in order to add new blocks to the blockchain. The first miner to solve the problem gets to add the next block and receives a reward in the form of new coins.
2. Proof of Stake (PoS): This mechanism allows participants to “stake” or lock up a certain amount of their coins as collateral in order to validate transactions and add new blocks to the blockchain. The validators are chosen based on the amount of coins they have staked, and they are rewarded with transaction fees.
3. Delegated Proof of Stake (DPoS): This mechanism is similar to PoS, but allows token holders to vote for a select group of validators, who are responsible for maintaining the blockchain. DPoS is designed to be more efficient and scalable than PoS, but is also more centralized.
4. Proof of Authority (PoA) : PoA is a consensus mechanism where a group of validators is pre-approved by the network’s creator. These validators are responsible for verifying transactions and adding new blocks to the blockchain, and are often chosen based on their reputation or identity.
5. Proof of Burn (PoB): In this mechanism, miners burn or destroy a certain amount of their coins in order to prove their commitment to the network. This process is used to determine which miner gets to add the next block to the blockchain.
6. Proof of Elapsed Time (PoET): This mechanism is specifically designed for permissioned networks, such as consortium blockchains. PoET uses a random wait time to determine which miner gets to add the next block to the blockchain, but unlike PoW, it doesn’t require significant computational power.

Since the technology is relatively new, new consensus mechanisms are still being developed and experimented with. As you would have heard already, the most common ones are PoS & PoW. More on them in the next post!