Understanding Consensus Mechanisms
Cryptocurrency and blockchain expert Chris Berg explains the consensus mechanisms needed to run blockchains.
Consensus mechanisms are at the core cryptocurrencies. Blockchains need a way for the network to agree on which transactions to add and in what order.
Satoshi Nakamoto, the creator of Bitcoin, developed the Proof of Work Puzzle to tackle the Byzantine Generals’ Problem. The puzzle is a challenge where miners compete against each other to resolve a computationally difficult puzzle. The winner is afforded the right to group new transactions into a new block and receives Bitcoin as a reward.
The idea is to make it more appealing to protect the network than to attack it. The puzzle solves much of the problem but it’s slow and inefficient.
Proof of Stake is another consensus mechanism. It asks validators to stake an amount of crypto in exchange for rewards. The crypto is confiscated in case the network is attacked.
And finally, the Practical Byzantine Fault Tolerance (PBFT) allows token holders to vote on who will validate new transactions.
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