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Consensus Algorithms Securing Blockchain Transactions

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2 min read

Consensus Algorithms Securing Blockchain Transactions

If you only remember one thing about consensus algorithms, remember that they are what make the blockchain network so secure and decentralized. Consensus algorithms are designed to achieve reliability in a network involving multiple nodes*. Solving that issue — known as the consensus problem — is essential in distributed computing and multi-agent systems.

* A node is a point of intersection/connection within a network. In an environment like blockchain where all devices are accessible through the network, these devices are all considered nodes.

Consensus algorithms are capable of doing two things:

  • Ensuring that the next block in a blockchain is the only version of the truth;
  • Keeping powerful adversaries from derailing the system and successfully forking the chain.

Consensus algorithms ensure that the next block in a blockchain is fully validated and secured. There are multiple kinds of consensus algorithms which currently exist, each with different fundamental processes.

TYPES OF CONSENSUS ALGORITHMS:

  1. Proof of Work (PoW) algorithm in Bitcoin (and other PoW cryptocurrencies) functions as a tool that is used to process blocks of transactions and add them to the blockchain. In other words, proof of work is utilized for block generation. The process of generating correct proofs in order to add a block to the blockchain is known as “mining”. You can find out more about this topic in our GetSmart article, Mining for Crypto Gold.
  2. Proof of Stake (PoS) consensus algorithm is a relatively new way to generate blocks within a blockchain, differing from PoW. With Proof of Stake systems, individuals that are chosen to generate a block, also known as validators, depend on different sets of criteria. PoS also requires significantly less energy than PoW thanks to its validator selection criteria.
  3. The Proof of Burn (PoB) algorithm utilizes miners who send their coins to an unsendable address, effectively “burning” the coin forever. The entire idea behind PoB consensus is that the user burning the cryptocurrency shows a long-term commitment to the coin by burning it while receiving his/her gains much later.

All in all, without consensus algorithms, many blockchain networks would not be able to function properly and execute to their full capabilities while remaining decentralized and completely verified. Whether it’s PoS, PoW, or PoB, there are many ways to handle the verification process when it comes to securing each new block on the blockchain.

If you want to dive deeper into the Consensus Algorithm topic, use the buttons on the left to switch to Savvy and Genius articles!

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