In the world of crypto, “consensus” is quite literally when a network of computers (nodes) agree on what is true in the blockchain. They do not depend on banks or governments to verify; instead, the nodes decide to agree on which transactions are real and give their approval on the timeline of when they occured.
A consensus mechanism is a built-in set of rules that ensures every node reaches the same conclusion about which transactions to add to that ledger. The chain updates, and then the block is added if most nodes agree. But, if there are disagreements, the network goes with the longest or most common valid chain. This happens automatically via code, making it tamper-resistant.
There are different types of consensus mechanisms. One is Proof of Work (PoW). Here, nodes are ‘mined’ by solving difficult math puzzles using computing power. The first to solve the puzzle adds the block and gets rewarded for it. It’s energy-intensive but secure. Second is Proof of Stake (PoS), in this case, nodes stake their own crypto as collateral. The size of the stake and the randomness of the choice determine who gets to be a validator. This type of verification saves energy, but there is a chance of losing stake in case of misbehavior.
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In Bitcoin, miners race to solve puzzles and agree on the history of transactions. The network chooses the chain with more work behind it if two miners find blocks at the same time. Ethereum, on the other hand, switched to PoS in 2022. Ethereum holders stake ETH to make it faster and better for the environment.
Consensus is crypto’s backbone. It enables trust without intermediaries, cutting costs and borders in finance. It turns crypto into reliable, peer-to-peer money. Without it, blockchains would collapse, but as crypto grows, evolving mechanisms like these keep it innovative and secure.