Consensus Mechanism Definition

| Publish date: 11/06/2018 (Last updated: November 06, 2018 09:41 AM)

What is a Consensus Mechanism?

A consensus mechanism is a fault-tolerant structure that cryptocurrency blockchain systems used to achieve the agreement they need on both state of the network and a single data value within distributed processes or multi-agent systems, and maintains the collective network agreement of the ledger contents.

In other words, the consensus mechanism is what verifies that all information entering the ledger is valid and verifiable, or that the network is in consensus.

Types of Consensus Mechanisms

Several main consensus mechanisms are currently in use on various blockchains, and more are being added all the time. The two primary consensus mechanisms are:

  1. Proof of Work (PoW)
  2. Proof of Stake (PoS).

Proof of Work

Proof of Work, the consensus mechanism on which Bitcoin was originally premised, gives a reward to the first miner who solves the cryptographic puzzle within a particular block. The puzzle is verified by the network, the block is attached to the blockchain, and the miners go to work on the next puzzle. A few key conditions define the POW system:

  • Asymmetrical puzzles: Miners have difficulty solving the puzzle, but the answer is easy to verify.
  • Work quantity over work quality: the only advantage any miner can hold over another is purely through computational power. Intellect or skill is not a factor.
  • Variable puzzle parameters: the network increases or decreases the difficulty of mining puzzles based on how long it is taking miners to solve the puzzles. If mining time falls outside the set parameters, the calculations will change accordingly. For Bitcoin, the block generation time average is 10 minutes.

Proof of Stake

The other primary consensus mechanism in heavy use today is Proof of Stake. Proof of Stake miners still validate transactions and achieve consensus, but the entire mechanism is based not on a mathematical problem, but on each miner’s stake in the blockchain. In other words, the amount of coins or tokens a miner possesses determines if they are chosen to validate a transaction.

PoS not only requires a fraction of the energy used by PoW, it also encourages a fair and engaged mining community, because miners must own and support whatever currency they are mining.

Both systems offer advantages and disadvantages, but regardless, a consensus mechanism is required for the trustless, immutable, decentralized nature of blockchain.


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