Over the years, computer processing has become an important part of the consensus mechanism in the lives of all of us. Consensus mechanisms have become the backbone for the entire cryptocurrency industry today, making blockchain a fundamental concept.
The underlying principles are represented by block verification in the blockchain. The consensus mechanism outlines certain conditions that must be met by validators and nodes to allow certain new blocks to be added to the blockchain. There are many consensus mechanisms, which serve as a clear theorem of blockchain technology, with some of the main features being: decentralized, public ledger, distributed.
Proof-of-Work (PoW) is one of the earliest blockchain consensus mechanisms created. Bitcoin is introduced by the concept of blockchain. And if you are engaging in different Bitcoin and crypto transaction you should be well aware in choosing the best crypto trading wallet.
Bitcoin developers are driven to tamper with blockchain technology, with new consent mechanisms emerging. The most well-known are consensus mechanisms that include VeChain's Proof-of-Authority (PoA) and Ethereum's Proof-of-Stake (PoS).
The agreement is ensured by a consensus mechanism, to allow block creation and validation of transactions, which has become a key to the selected requirement.
Blockchain Consensus Mechanisms
There are several types of consensus mechanism algorithms, which all do the same thing with the same principles. Proof of Work (PoW) can be achieved by consensus algorithms. The most popular digital currencies are bitcoin and litecoin which are used by cryptocurrency networks. You would need a participating node to prove it and the task presented with it gets the authority to add some new transaction to the blockchain.
Mining with bitcoin would require a longer processing time and higher energy consumption by the mechanism. The Proof of Stake (PoS) algorithm is fully agreed upon, with PoW algorithms developed as an alternative to low cost and low energy consumption.
The allocation of a virtual currency token with the responsibility of maintaining the public ledger with the participating node in its number ratio is included. Coming with some downsides, saying that crypto is encouraging hoarding instead of spending.
If we think both PoS and PoW continue to be the most prevalent in the blockchain space. Other consensus algorithms such as Proof of Capacity (PoC) have been included that allow all the nodes contributing to the blockchain network to share the memory space. The node has more memory or hard disk, which will give you more rights to create the public ledger.
What are the Types of Consensus Mechanisms?
- Proof-of-burn (POB)
Proof-of-burn uses the burning transaction, which means the coins are burned by the miners to decrease the supply rate, in this process of burning they send the coins to a verifiable but unusable wallet address, from where the coin doesn’t remain in its usable form.
- Proof-of-stake (POS)
It is an alternate form of POW, which is used by the Ethereum Blockchain network, it is used to lock up the invested funds by the investors till the staking process. And after the miners can achieve the actual blocks through the betting process, they will get a reward according to the bet placed.
- Proof-of-capacity (POC)
The capacity means you have to stake your hardware to increase the capacity for the validation of transaction, that is you will provide a space for recording the digital files, the more hardware the miner will add, there is more chance of winning.
- Proof-of-activity (POA)
Proof-of-Activity is like a blockchain consensus algorithm that is used for cryptocurrencies and systems. Which you can use to make sure that the address of the transactions performed by the blockchain is genuine. By which it is ensured that the miners can reach a consensus. PoA is considered a combination of two different blockchain consensus algorithms: Proof-of-Stake (PoS) and Proof-of-Work (PoW).