Just like in relationships, trust is one of the biggest sticking points within any human transaction. Historically, this is the reason why contracts were created — to ensure that what was promised in the contract was fulfilled, via a third party — and it’s also the reason why financial transactions often have escrow systems, or intermediaries.
With blockchain technology that reliance on trust, or intermediaries, disappears. This is because blockchain uses a ‘trustless system’, thanks to its decentralized nature, seeing as users don’t need to know or trust each other, or a third party middleman, for the system to function. This is achieved by using special consensus mechanisms.
A consensus mechanism (or protocol) is a set of rules allowing users to generate a record of the transaction, such as which funds belong to which address in a digital ledger system, allowing anyone to verify it on the public ledger. When this agreement of the transaction is verified, the consensus is created without any central authority.
The terms consensus protocol, mechanism or algorithm are sometimes used interchangeably, though they have some differences. The protocol is the primary rules in a blockchain. The algorithm is the mechanism used to follow these rules. There are dozens of consensus mechanisms in the blockchain landscape, all possessing various features to achieve consensus in a decentralized way.
The most widely used is Proof of Work (PoW), created for Bitcoin, and used by Ethereum (which will change in 2020). PoW is very effective, however it is energy intensive, environmentally unfriendly and has scalability issues. Thus, other consensus algorithms have been created since, with different merits and tradeoffs.
On this page you’ll learn more about all these consensus algorithms. This will range from short and sweet infographics explaining briefly what a consensus algorithm is, as well as longer articles diving deeply into the consensus ecosystem . There are also links to interesting discussions on whether proof of work (PoW) is the ultimate consensus solution, plus free event invites to ‘BlockTalk’ debates on the subject.