What Is Blockchain Consensus Algorithm?
Introduction
The blockchain network is decentralized with no central authority or regulation. The verification and validation of transactions are unarguably secured and verified, so how is this possible? It is the presence of the consensus algorithm.
A consensus algorithm is a core part of the blockchain network because it is the protocol through which all the peers and participating nodes of the blockchain network reach a common agreement (consensus) on the present state of the distributed ledger.
The consensus algorithm is built to ensure that all agents or stakeholders in the decentralized system can agree on a single fact and consider the divergent issues. The consensus algorithm ensures the system is fault-tolerant and reliable.
What Is Blockchain Consensus Algorithm
The consensus algorithm is a set of rules that govern how participating nodes interact and engage in the blockchain ecosystem. It enables the blockchain network and all protocols built on it to attain reliability and ensure a high level of trust between participating nodes.
Blockchain Consensus Algorithm is a smart mechanism that ensures and enables users or machines to coordinate in a distributed arrangement. The consensus algorithm is central to the operations of the blockchain network.
In a decentralized setup like the blockchain network, there are several participating nodes and stakeholders who are likely to have divergent opinions. How do we reach an agreement and ensure that every participating node fully supports the arrangement? It is the consensus algorithm that provides a mutual agreement in this context.
In the blockchain network, there are different servers, nodes, miners and stakeholders spread across other locations. All these actors must reach a consensus and verify that a transaction or block is accurate before validation.
The consensus algorithm enables these mutual agreements making the network reliable and highly secured. There are several objectives that the consensus algorithm is designed to achieve in the blockchain network.
How Does The Blockchain Consensus Algorithm Work?
The blockchain network is robust and decentralized. There are no limits to what developers can build on it, and every developer has the liberty to choose what consensus algorithm they want to deploy in their protocol.
The notable consensus algorithm that you can deploy and how they work are;
Proof of Work (PoW) Consensus Algorithm
The Proof of Work consensus algorithm is the oldest and most notable consensus mechanism in the blockchain network. In Proof of Work, the participating nodes use mining to validate transactions and create new blocks. They are called miners.
The Proof of Work Consensus mechanism requires miners to solve complex mathematical puzzles using comprehensive computational power. The mining methods used in this consensus algorithm include GPU mining, CPU mining, ASIC mining and FPGA mining.
Blockchain protocols that use the Proof of Work consensus algorithm include Bitcoin, Litecoin, Primecoin, Zcash, Monero etc.
Proof of Stake (PoS)
The proof of Stake mechanism is regarded as one of the best and most environmentally-friendly consensus algorithms. The Proof of Stake consensus algorithm works by using validators instead of miners.
The contributing nodes are validators who can create new blocks over everyone. The PoS consensus algorithm saves energy and reduces time spent in validating transactions or creating new blocks. The delegated and leased Proof of Stake mechanism can be deployed on the blockchain.
Blockchain protocols like Dash, Peercoin, Pivx, Reddcoin and Ethereum 2.0 use the Proof of Stake algorithm.
