Detailed Guide to Consensus Mechanism in Blockchain:
It is a well-known fact that Blockchain’s selling point hinges on its use of decentralized ledger technology. However, the processes involved in the functioning of such technology are less known, an example of which is the consensus mechanism. This article takes on an expository tone by analysing the concept of consensus mechanism in Blockchain, its functioning, uses, and effects.
What is Consensus Mechanism in Blockchain?
A consensus mechanism is very integral to the workings and reputation of blockchain technology. It is a means of ensuring Blockchain’s functioning and security. A simple definition of a consensus mechanism would be that it is a protocol or algorithm used to verify transactions on Blockchain and ensure the reliability of peers. There are several consensus mechanisms, but the most common are the Proof of Work (PoS) and Proof of Stake (PoW).
Why Consensus Mechanisms
Consensus Mechanisms are essential to verify blockchain transactions. Consensus Mechanisms allow a set of nodes to reach an agreement as to the state of blockchains. For most blockchains (a good example is Ethereum), if the consensus rating is at least 66%, then the Blockchain’s authenticity is guaranteed. By nature, Blockchain, a decentralized public ledger for transactions, consists of independent blocks requiring peer-to-peer verification, hence, Blockchain’s reputation as a peer-reviewed network. These blocks need to be verified by individuals to curb fraud and discourage double-spending. Consensus Mechanisms are also a form of monitoring actors to ensure that only a single version of the transaction is shown in the history of the block. The validity process is not limited to the Blockchain alone; humans are required to validate these blocks, so they must have an authentic record and adhere to strict rules themselves. There is a protocol that oversees the selection process of persons who are to validate blockchains using consensus mechanisms.
What are the Different Consensus Mechanisms?
Consensus Mechanisms differ depending on their scalability, energy, and security. There are a lot of consensus mechanisms, but for this article, we will only be considering the two common ones. Proof of Work Proof of Work (PoW) is the first consensus algorithm used by Decentralized Ledgers. Now, it is popularly used by Bitcoin. With PoW, validators, mainly called miners, are required to solve complex puzzles. The fastest fingers to solve this puzzle has the privilege of mining a new block and accessing crypto rewards. The PoW offers very high security against hacking, alteration, and fraud. However, the process consumes a lot of time and energy and has had a lot of environmental criticisms. Proof of Stake Proof of Stake (PoS) is a recent alternative to the PoW. The system randomly selects a user and awards them a chance to create a new block node by staking their coin. This process is called being a validator. Validators are chosen based on factors like the design of Blockchain, weight of the stake, and ownership of coins.
Consensus mechanisms are not limited to PoW and PoS. Others include Delegated Proof of Stake, Proof of Authority, Proof of Burn, Proof of Capacity, and so on. Kindly note that each of these is coin-dependent; they will differ based on the type of coin. These consensus mechanisms will help give a clearer perspective on what currency to choose.
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