What is the consensus mechanism in blockchain?
Consensus means a general agreement in simple words. The consensus mechanism in the blockchain is a process. In which peers of the blockchain network reach an agreement about the present state of the data in a network.
Consensus mechanisms are used to verify transactions and maintain the security of the underlying blockchain.
There are two widely used consensus mechanisms in recent times.
1) Proof of Work (PoW)
2) Proof of Stake (PoS)
Chainalysis
Roughly there are two categories of consensus mechanism exists:
1) Proof-based, leader based, or the Nakamoto consensus whereby a leader is elected and proposes a final value.
2) Byzantine fault tolerance-based, which is a more traditional approach based on rounds of votes.
Proof Of Work (PoW)
Proof of work is a form of cryptographic proof in which one party proves to others that a certain amount of a specific computational effort has been expected.
Verifiers can subsequently confirm this expenditure with minimal effort on their part.
Proof of work was later popularized by Bitcoin, as a foundation for consensus in a permissionless decentralized network, in which miners compete to append blocks and mint new currency, each miner experiencing a success probability proportional to the computational effort expended.
Proof of Stake (PoS)
With proof of stake, cryptocurrency owners validate block transactions based on the number of stacked coins.
Proof of work was the initial consensus mechanism used to validate a blockchain and add new blocks, whereas proof of stake was created as an alternate option to proof of work.
Miners need to solve the cryptographic puzzle in the proof of work mechanism, whereas the proof of stake mechanism requires to stake and hold cryptocurrency to earn incentives.
The next block writer on the ledger is randomly selected with odds in favor of nodes with the largest stack positions.
Trivia: Ethereum protocol switched consensus mechanism from PoW to PoS on September 15th, 2022, because it is more secure, less energy-intensive, and better for implementing new scaling solutions, compared to the previous proof-of-work architecture.
The consensus mechanism used in bitcoin is Proof Of Work, and the consensus mechanism used in Ethereum is Proof Of Stack.
Proof of History(PoH) is a whole different term, which is a Solana consensus mechanism. Solana is a public blockchain that is second on the list after Ethereum in decentralized application development.
The Proof of History provides a way to cryptographically prove the passage of time and where events fall in that timeline. This consensus mechanism is used in tandem with another more conventional algorithm like the Proof of Work (PoW) or Proof of Stake (PoS). The Proof of History makes the Proof of Stake more efficient and resilient in Solana.
References:
https://en.wikipedia.org/wiki/Proof_of_work
https://www.investopedia.com/terms/p/proof-stake-pos.asp
https://www.infoworld.com/article/3666736/solana-blockchain-and-the-proof-of-history.html
