What is Consensus in Crypto? Here’s All You Need To Know

A consensus mechanism refers to methodologies that are used to achieve agreement, trust, and security in a decentralised computer network.

In simple words, a consensus mechanism is a means for verifying entries in a distributed database while also keeping the database secure.


Blockchain is a decentralised database, which means it is managed collectively by distributed computers, or nodes, on a distributed peer-to-peer network. To avoid a single point of failure, each peer or node keeps a copy of the ledger.

Any network updates or validations are reflected in all copies at the same time. This ensures the integrity and security of data records while also instilling confidence in the system—all without the need for a centralised third party.

Consensus algorithms are used in blockchain networks to reach agreement among numerous distributed nodes. Consensus mechanisms protect the network by preventing unauthorised users from validating fraudulent blockchain transactions.

What is Consensus in Crypto?

In a centralised system, a central authority is in charge of preserving legitimate records and is responsible for making any updates.

However, decentralised and self-regulating systems, such as public blockchains, function on a global scale with no central authority. They comprise contributions from hundreds of thousands of participants who work on blockchain transaction verification and authentication, as well as block mining activities.

Faced with the dynamically changing status of the blockchain, these publicly shared ledgers require an efficient, fair, real-time, functional, reliable, and secure mechanism to ensure that all transactions occurring on the network are genuine and all participants agree on the ledger’s status.

This critical role is carried out by the consensus mechanism, which is a system of rules that determines the authorization of contributions made by the blockchain’s various participants (i.e., nodes).

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Popular Blockchain Consensus Mechanisms

Proof of work (PoW)

This consensus mechanism compels network participants to invest effort in solving an arbitrary mathematical puzzle in order to avoid system tempering and maintaining the network.

This mechanism is commonly employed in cryptocurrency mining to validate transactions and generate new coins. Proof of work at scale demands enormous amounts of energy, which only grows as more miners join the network.

Proof-of-Stake (PoS)

This mechanism allows cryptocurrency owners to confirm block transactions based on the quantity of coins staked. The Proof-of-Stake (POS) mechanism was developed as an alternative to the original consensus mechanism, Proof-of-Work (POW), to validate a blockchain and add new blocks.

PoS mechanisms need validators to hold and stake tokens for the opportunity to collect transaction fees, whereas PoW mechanisms require miners to solve cryptographic problems.

Proof of Capacity (PoC)

Proof of Capacity (PoC) allows mining devices (known as nodes) on the blockchain network to mine available cryptocurrencies using free space on their hard drive. PoC works by keeping a list of possible solutions on the hard disc of the mining equipment before the mining activity begins.

The larger the hard drive, the more possible solution values one can store on the drive, the more possibilities a miner has of matching the needed hash value from his list, and therefore more chances of winning the mining reward.


Which consensus mechanism is used by Bitcoin?
Poof of Work (PoW)

What consensus does Solana use?
Solana blockchain uses proof-of-history consensus mechanism. This mechanism uses timestamps to define the next block in Solana’s chain.

Does Polkadot uses a consensus?
Polkadot (DOT) uses the nominated proof-of-stake (PoS) consensus algorithm.

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