What is a Consensus Mechanism ?
In blockchain systems, a consensus mechanism is a programme that facilitates widespread consensus over the ledger’s current state. It is typically applied in a network with plenty of users and operations. The use of consensus mechanisms benefits distributed ledgers, blockchains, and cryptocurrencies since they can substitute significantly slower human auditors and verifiers.
A good example of this is the Proof-of-Work (PoW) technique used by the Bitcoin network, which necessitates computing power to crack an encrypted word problem known as the hash. Because Bitcoin uses a proof-of-work (PoW) algorithm, each node on the network must verify the data that has been altered after a single miner (or a group of miners working together) has solved the hash. To do this, each node must have: The data structure,The block header hash, The block timestamp, The block size, The first transaction
It then completes a lengthy transaction verification check list. This verification is orders of magnitude faster than human verification and substantially faster than mining, the process of solving the hash.
In this article we’ll talk about Consensus Mechanism history, types of consensus mechanisms and the future of consensus mechanisms.
Consensus Mechanisms’ History
Shared databases were developed so that several users could access the data they housed as computers and networks became more common in the 1980s and 1990s. Most had a central database with permissions that users could access from several stations. This system developed into centralised networks with administrators who assigned user permissions and protected the confidentiality of the data.
Due to the fact that they stored data and were networked so that numerous people in various locations could access it, these shared databases came to be known as distributed ledgers. Preventing data manipulation and unauthorised access, whether intentional or not, was among the most pressing problems that needed to be solved. To prevent data from being modified, a mechanism for automating distributed database maintenance was needed.
This requirement inspired the development of distributed autonomous consensus, in which programmes on a network used cryptographic methods to agree on the state of a database. A hash, or lengthy string of alphanumeric numbers, was intended to be produced by encryption algorithms in order to reach agreement. Programmes running on the network would then verify the hash. The programmes were made to compare hashes to make sure they matched because a hash can only change if the data entered into the hashing method is altered.
The network was deemed to have reached consensus on the data when every programme that was running on it produced an identical alphanumeric string. Thus, consensus methods were created, commonly credited to Satoshi Nakamoto, the mysterious person who created Bitcoin.
Prior to Nakamoto’s publication of the whitepaper that made Bitcoin famous, many individuals had been working on consensus techniques for many years.
Types of Consensus Mechanisms
Consensus mechanism algorithms come in several varieties, and they all operate according to unique principles.
The most well-known cryptocurrency networks, including Bitcoin and Litecoin, use the proof of work (PoW) consensus mechanism. A participating node must demonstrate that the work they have completed and submitted qualifies them to be granted permission to add new transactions to the blockchain. However, the bitcoin mining process uses a lot of energy and takes a while to complete.
Another popular consensus method is proof of stake (PoS), which emerged as a low-cost, low-energy replacement for the PoW process. It entails giving participant nodes a share of the public ledger maintenance duties based on the quantity of virtual currency tokens they hold.
Other consensus algorithms, such as Proof of Capacity (PoC), which permit sharing of memory space among the contributing nodes on the blockchain network, exist in the blockchain realm, even though PoW and PoS are by far the most common. The privileges a node is given for maintaining the public ledger increase with the amount of memory or hard disc space it possesses. On the Decred blockchain, proof of activity (PoA) is a hybrid that combines elements of both proof of work (PoW) and proof of stake (PoS). Proof of Burn (PoB) compels users to transmit little amounts of cryptocurrency to unreachable wallet addresses, essentially “burning” those addresses out of existence.
Future of Consensus Mechanisms
Consensus methods are essential in distributed ledger networks used by businesses and are employed by all cryptocurrencies. Platforms for corporate and government usage have been developed, enabling each organisation to select modules tailored to their requirements and supported by consensus procedures. One of the more well-known distributed ledger technologies, Hyperledger Fabric, offers a variety of consensus algorithms. One entity might not require proof-of-work, which is regarded as being byzantine fault tolerant, while another might not. Although the future of cryptocurrency is uncertain and unstable, consensus methods are still a crucial component of new technologies. They protect the security and integrity of data and prevent individuals with malicious intentions from accessing distributed ledgers.
Conclusively, a key component of distributed ledgers, databases, and blockchains now includes consensus mechanisms because of how digital the world is becoming in general. People who do not have access to financial services can now do so thanks to blockchain technology, and businesses now require data security more than ever. Ownership of real assets is being tokenized on ledgers and blockchains.
Consensus systems validate data inputs and outputs, which translates to automatically auditing the ordinary digital transactions of today—without human supervision or intervention. They establish a situation where you do not need to rely on the sincerity of the other party in a transaction since they make sure the information is secure and unchangeable.