The consensus mechanism specifies sets of rules that must be followed by nodes in the peer-to-peer network for them to agree on which transactions are genuine and may be added to the blockchain. The consensus method is used to determine the current state of the blockchain.
The consensus mechanism ensures that the entire system is fault tolerant to reach the necessary agreement of a single data value or a single network state. It also ensures that all parties participate in ensuring the safety of the blockchain network.
The most commonly used types of consensus mechanisms include:
- Proof-of-work (PoW). The PoW algorithm is usually operated by miners or nodes cooperating to solve a cryptographic problem to create the next block.
- Proof-of-stake (PoS). The proof-of-stake is used in incidences where multiple tokens need to be verified. The PoS helps to save on operating costs as well as energy. The PoS rule requires miners to reveal their ownership of percentage shares to perform the corresponding percentage of mining activity.