What is Consensus in Blockchain?

Published Jun 16th, 2022
Updated Mar 20th, 2023

Consensus is when at least 51% of the nodes on a blockchain network approve a transaction taking place.

Consensus on a blockchain is an algorithm-based automatic process whereby a transaction or other record is evaluated by at least 51% of the nodes on a blockchain to ensure that it agrees with the existing blockchain data, and that it is added to it is well. This process is critical to ensuring that all new data is processed and hashed to the existing blockchain so as to prevent inconsistencies or forked chains from occurring in the blockchain network. Basically, consensus is where the majority of nodes agree to the next change to be applied or piece of data to be added or removed from the blockchain ledger. This entails a new block being hashed and the data being stored on it.

Different Types of Consensus Algorithms

Proof of Work (PoW)

This protocol has the mining nodes compete against each other to complete a complex randomly generated mathematical problem. The first node to guess the or calculate the correct answer is awarded the mining rights and the associated award. The mined block that contains the transaction is encrypted during this process and added to the blockchain. Bitcoin is an example of a blockchain that uses a PoW consensus protocol.

Proof of Stake (PoS)

This is where users have a stake in the network that is proportional to the amount of cryptocurrency they own on that network. However, instead of having rights to ownership in the company, the token owner only has voting rights and the right to use their coins as collateral for mining rights, meaning that they will be prioritized to mine the next block and receive the cryptocurrency reward for doing so. Ethereum is an example of a blockchain that uses PoS consensus protocols.

Delegated Proof of Stake (DPoS)

Based on the PoS protocol, instead of using a bidding mechanism, token holders use their stake to vote on which node will get to mine the next block.

Proof of Burn (PoB)

This is a consensus protocol that validates that a certain number of altcoins or tokens were sent to a once-off cryptocurrency wallet address that can never be accessed again. This process is known as ‘burning’ and is usually done so as to increase the value of the cryptocurrency that remains in circulation.

Proof of Authority (PoA)

These are consensus algorithms that can only be implemented by approved accounts known as ‘validators.’ This type of account is typically utilized on private and consortium blockchains where privacy and discretion is valued over transparency. All transactions and blocks created can only be done on the blockchain with the approval of validator nodes.