What is Consensus Mechanism?
Let's find out Consensus Mechanism meaning, definition in crypto, what is Consensus Mechanism, and all other detailed facts.
The term Consensus Mechanism, also referred to as consensus algorithm, describes a computer technology used for information processing. Consensus mechanisms have been adopted for blockchain technology, becoming the most crucial tool in cryptocurrency development and utilization.
The consensus mechanism is the foundational technology for block verification. It created the outline for conditions that the network nodes and validators must meet in order to create and verify new blocks on the blockchain.
There are numerous consensus mechanisms that require different software and hardware. However, their key principle is to help build a decentralized public ledger that makes up the blockchain.
The first consensus mechanism developed specifically for blockchain technology was Proof-of-Work (PoW). It was launched alongside the Bitcoin blockchain. Given some of its technical limitations and hardware requirements, developers started working on new concepts of consensus mechanisms.
This led to the development of mechanisms that have become as popular as PoW, such as Proof-of-Stake (PoS), which is employed by Ethereum, Proof-of-Authority (PoA), used by VeChain, and Proof-of-Staked-Authority (PoSA) on the Binance Smart Chain. Each method ensures agreement between the network nodes to validate transactions and create new blocks on the chain.
Blockchain protocols are unable to properly function without consensus algorithms. As the name suggests, this technology ensures consensus is maintained between all nodes working in the network and that all nodes follow the same set of rules.
Furthermore, consensus algorithms provide security to blockchain users. Invalid transactions are kept out of the blocks by node validators that follow the predetermined consensus algorithm rules. Consensus mechanisms allow multiple transactions to be managed and validated in a very short time window.
In order to validate a transaction and add it to the block, all nodes must reach a consensus. Blockchain networks are decentralized, therefore all node operators share an equal distribution of responsibility. The consensus mechanism can successfully function even if some of the nodes are malfunctioning or maliciously acting against completing the tasks.
The consensus algorithm technology is a practical example of a theoretical problem known as the Byzantine Generals' Problem. It poses the question of whether a computer network can achieve a consensus in a network of independent, decentralized nodes when some of the nodes are malfunctioning for one reason or another.