What Is a Consensus Mechanism?
When we talk about how blockchain works, a question always comes to our mind, which is the powerful mechanism that blockchain uses to provide services to the entire world. So, Blockchain operates on a mechanism known as a consensus mechanism. This mechanism ensures that all participants in a decentralized network agree on the contents of the blockchain, promoting trust and reliability. It plays a crucial role in verifying and adding new transactions to the blockchain, enhancing network security and trust in a decentralized environment.
Let Explore the Common consensus mechanisms used for blockchain technology:
- Proof of Work (PoW)
- Proof of Stake (PoS)
- Delegated Proof of Stake (DPoS).
1. Proof of Work (PoW)
Proof of Work (PoW) is a vital part of blockchain technology, especially in Bitcoin. It functions in several steps: first, transactions are grouped into blocks, and miners validate them. Then, miners compete to solve a complex math puzzle, finding a specific “nonce” that, when combined with block data, creates a hash with certain requirements. PoW demands a lot of energy due to extensive calculations. The winning miner broadcasts the solution, which others verify. Successful miners get cryptocurrency rewards and fees. The network adjusts the puzzle’s complexity to maintain a steady block creation pace, ensuring competition and safety. However, PoW has been criticized for its high energy use and environmental impact.
2. Proof of Stake (PoS)
Consensus mechanism used in blockchain networks to achieve agreement among participants regarding the content of the blockchain. PoS selects validators to create new blocks and verify transactions based on the amount of cryptocurrency, its means that they lock up a certain amount of cryptocurrency in a smart contract on the blockchain as a security deposit, which they stand to lose if they validate fraudulent or incorrect data. Staking serves as a commitment to the network’s security and ensures that validators have a vested interest in maintaining the integrity of the blockchain.
The given flowchart illustrates the entire process of Proof of Stake (PoS) in blockchain technology.
