Home / Definitions / Consensus


Ali Azhar
Last Updated May 3, 2022 6:46 am

Blockchain networks are essentially distributed databases of digital transactions or events. The network’s nodes must reach an agreement to complete the digital transaction process, and this agreement is achieved through a mechanism called consensus. 

What is consensus?

In blockchain technology, the consensus mechanism formalizes an agreement in which the majority, or at least 51%, of network nodes agree that a particular digital transaction was executed and completed in the blockchain network.

The consensus mechanism has been used for decades to establish a state of agreement on application servers, database nodes, and other enterprise infrastructure. The mechanism has only recently been applied to the state of the blockchain network.

What role does consensus play in blockchain and cryptocurrency?

Consensus is used by several cryptocurrencies, including Bitcoin and Ethereum. The mechanism is used in blockchain technology to authenticate transactions and maintain the security of the underlying blockchain. Every cryptocurrency relies on consensus to legitimize the transactions. After the digital transaction is validated, it becomes part of the blockchain record. 

The consensus mechanism influences the validation of cryptocurrency transactions, network fees, the efficiency of transactions, and how many resources are used to complete those transactions. The proof of work method is the most popular type of mechanism used in consensus, but there are other mechanisms, such as proof of stake and proof of authority, that are also used for this purpose.

How does consensus work?

Cryptocurrency miners validate new transactions on the blockchain network. Using a proof of work protocol or other validation methods, a miner competes against other miners to validate a block of transactions. The miner who completes the validation earns a fee, paid by the sender of the transaction. 

The consensus mechanism is used to make sure the miners agree on the completed transaction and the information for the new block is distributed to all miners. Every miner on the network has access to a copy of the blockchain in the form of a node. This is how consensus is used as a continuous method to validate which digital wallet owns which assets.

Pros and cons of consensus

One of the most important features of consensus is that it helps synchronize data through the network, building trust in a blockchain. Anyone on the network can use the mechanism. The downsides to using the consensus mechanism include that it is energy-intensive and vulnerable to a hacking technique known as the 51% attack.

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