A consensus mechanism is an underlying technology behind the main functionalities of all blockchain technology, which makes them an essential operating feature of all cryptocurrencies.
Over the past thirty years, consensus mechanisms have become an important part of the integration of computer processing into our everyday lives. Today, consensus mechanisms create the backbone of the whole cryptocurrency industry, as they are the foundational concept behind all blockchains.
A consensus mechanism represents the underlying principles of block verification in the blockchain. Consensus mechanisms outline the conditions that need to be met by nodes and validators so that new blocks can be added to the blockchain. There are numerous different consensus mechanisms, and all of them serve as the theorem behind the main characteristics of blockchain technology: a decentralized, distributed, public ledger.
Proof-of-work (PoW) is the first blockchain consensus mechanism created. It was introduced with the conception of the Bitcoin blockchain. Bitcoin inspired developers to start tinkering with blockchain technology, and new consensus mechanisms began emerging. Today, some of the most well-recognized consensus mechanisms include Ethereum’s proof-of-stake (PoS) and VeChain’s proof-of-authority (PoA). All of these different consensus mechanisms place the importance on a selected requirement (work, stake, authority) in order to ensure agreement and allow transaction validation and block creation.
Consensus mechanisms are an essential requirement for the proper functioning of any blockchain protocol. They ensure that all nodes work in agreement, and the whole network of distributed node operators adhere to the same conditions and rules. Consensus mechanisms also ensure the security of users of the blockchain. Node validators are responsible for weeding out invalid transactions, and this action is successfully achieved through the predefined rules set out in the consensus mechanism. Not only that, for a transaction to be successfully registered on the ledger and added to a block, consensus needs to be achieved between all nodes. The equal distribution of responsibility across node operators ensures that the consensus mechanism continues to function successfully, even in the event of one or more nodes failing to accomplish their tasks.
In essence, consensus mechanisms secure the underlying principles of blockchain technology and allow for the distributed management and validation of numerous transactions in a matter of seconds. It is no easy feat to create a working and applicable consensus mechanism; however, with the rise of blockchain technology, developers undertake more innovative approaches.
The technology behind consensus mechanisms is based on a theoretical problem outlined by computer scientists in 1982. The Byzantine Generals' Problem asks whether it is possible to form a consensus in a computer network composed of independent, geographically distributed nodes, and consensus mechanisms present the answer.