consensus mechanism

A consensus mechanism is a technology used in distributed ledger systems like blockchain to arrive at a single, consistent and honest state of ledger across all the network participants. 
Proof-of-work (PoW) and proof-of-stake (PoS) are the two most popular consensus mechanisms used in cryptocurrency networks like Bitcoin and Ethereum.

According to Ethereum’s consensus mechanism definition: “Consensus mechanisms (also known as consensus protocols or consensus algorithms) allow distributed systems (networks of computers) to work together and stay secure.”

These mechanisms have been developed to reach consensus among nodes – a computer, or group of computers working together, that supports a crypto network through the verification of transactions – servers and other blockchain infrastructure. 

What does consensus mechanism mean? “Reaching consensus means that at least 51% of the nodes on the network agree on the next global state of the network,” explained Ethereum.

How does the consensus mechanism work?

Blockchain networks like Bitcoin are distributed ledgers (distributed databases) that record, communicate and transact information in a decentralised manner. These blockchain networks are built on top of a network of nodes that can create, receive, send and preserve data.

Unlike a centralised ledger system where an authority is responsible for reading, writing and auditing information, decentralised systems depend on consensus mechanisms.

The network of nodes in a blockchain must be synchronised with one another and must be in agreement or in consensus on the state of the network. In other words, nodes have to agree on which transactions are legitimate and should be included in the blockchain ledger.

Consensus mechanisms are thus core to decentralisation of a network and are used to prevent fraudulent transactions such as double spending or reversing of legitimate transactions.