Consensus is a term that defines the mechanism by which all participants in a distributed blockchain network reach unanimous agreement and validate each other’s information, thus ensuring the integrity, security and trust of the digital ledger without relying on a central authority. In simpler terms, it is the method by which the network decides which transactions and information are true and secure.
Think of consensus as “digital voting”. Instead of relying on a bank or institution to validate a transaction, nodes in the network must agree (by consensus) on the validity of that transaction.
Consensus systems are important for several reasons:
- Develops trust: Through consensus, the blockchain network reaches unanimous agreement on the validity and order of transactions, preventing fraud (such as “double spending”) and maintaining the integrity of the entire distributed ledger.
- Prevent fraud (e.g. double spending): In a blockchain network, without consensus, a user could try to spend the same cryptocurrency multiple times. Consensus mechanisms prevent this.
- Keeps decentralization: There is no centralized entity. Through consensus, all nodes play an equal role in deciding what is accepted as valid.
Types of consensus mechanisms
There are several types of consensus mechanisms, each tailored to different types of blockchain. Here are the most popular ones:
1. Proof of Work (PoW)
- How it works: Nodes in the network, called miners, solve complex mathematical problems to validate transactions and create new blocks.
- Advantages: It is very secure, as it requires a significant amount of resources (energy and time) to compromise the network.
- Disadvantages: High energy consumption. For example, the Bitcoin network uses considerable amounts of electricity for this method.
2. Proof of Stake (PoS)
- How it works: Instead of consuming energy resources to find a new block, validation is carried out by participants owning and “staking” their own cryptocurrencies.
- Advantages: It is much more energy efficient than PoW.
- Disadvantages: Depending on the implementation, can create centralization problems as those who hold more cryptocurrencies have more influence.
3. Delegated Proof of Stake (DPoS)
- How it works: Participants choose delegates (trusted nodes) that validate transactions on their behalf.
- Advantages: It is fast and efficient.
- Disadvantages: It can become more centralized and depends on trust in delegates.
4. Byzantine Fault Tolerance (BFT)
- How it works: It is a mechanism that ensures that the network is working properly even if some nodes are faulty or malicious.
- Advantages: Increased security.
- Disadvantages: Can become complex and difficult to scale on a very large network.
Consensus – Key issues
High security
Consensus mechanisms create a very difficult system to compromise. Anyone who wants to attack a decentralized blockchain network must control more than 50% of the validation power (in the case of PoW) or stake (in the case of PoS).
Data immutability
Once a transaction is validated by the network and added to the blockchain, it cannot be altered, providing transparency and trust.
Scalability and decentralization
Together with other technologies, consensus mechanisms enable blockchain scalability without compromising decentralization.
Choosing the best consensus mechanism
There is no “universally best” consensus mechanism. The choice depends on the objectives of the network. For example:
- Bitcoin uses PoW because security and decentralization are priorities.
- Ethereum migrated to PoW to reduce power consumption and increase efficiency.
- Networks like EOS prefer DPoS to focus on transaction speed.
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