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Lucian Gruia for CN Group CZ a.s.

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What is consensus in blockchain technology

Consensus mechanisms

Sometimes a confusion appears between the blockchain type and its consensus mechanism. This is why it is important to understand what consensus is and its role in a blockchain.
The consensus mechanism makes sure all nodes are synchronised with each other and agree on which transactions are legitimate and added to the blockchain. It makes sure that everyone in the network uses the same blockchain.
In a centralised system, a central administrator has the authority to maintain and update the database.

Consensus assures that the protocol rules are being followed and guarantees that all transactions occur in a trustless way. There are some specific goals in the Blockchain consensus protocol, such as agreement, collaboration, cooperation, equal rights for each node, and mandatory participation of each node in the consensus process.

Types of consensus algorithms:

  • Proof of Work (PoW) — is a decentralised consensus mechanism that requires members of a network to expend effort solving an arbitrary mathematical puzzle to prevent anybody from gaming the system. Proof of work is used widely in cryptocurrency mining, for validating transactions and mining new tokens.
  • Proof of Stake (PoS) — protocols are a class of consensus mechanism for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency. Unlike a proof of work (PoW) protocol, PoS systems do not incentivise extreme amounts of energy consumption.
  • Delegated Proof of Stake (DPoS) — is a popular evolution of the PoS concept, whereby users of the network vote and elect delegates to validate the next block. Delegates are also called witnesses or block producers. Using DPoS, you can vote on delegates by pooling your tokens into a staking pool and linking those to a particular delegate. You do not physically transfer your tokens to another wallet, but instead, utilise a staking service provider to stake your tokens in a staking pool.
  • Proof of Importance (PoI) — is a cryptocurrency term defined as a blockchain consensus technique — essentially, proof of important works to prove the utility of nodes in a cryptocurrency system, so that they can create blocks.

Other consensus mechanisms:

  • Proof-of-Capacity(PoC) — PoC is another consensus algorithm used in blockchains that allows mining devices in the network to decide mining rights and validate transactions with the help of their available hard drive space.
  • Proof-of-Activity (PoA) — PoA is a consensus algorithm used in Blockchain technology that ensures that all transactions occurring on the network of Blockchain are genuine and authentic. PoA consensus, which is a combination of proof-of-work and proof-of-stake, ensures that all miners arrive at a consensus. In other words, PoA is an attempt to consolidate the best features of PoW and the PoS systems.

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