Consensus

What Is Consensus?

Consensus is reached when all network participants agree on the sequence and contents of the blocks in the blockchain. All decisions are managed by a single center of power in centrally controlled systems. For example, all businesses employ a centralized accounting ledger to document all economic transactions they conduct. 

Traditionally, this ledger is administered by the accounting department, the only organization responsible for maintaining and updating the entries. Decisions are made jointly in decentralized systems, comprising a plethora of scattered, autonomous individuals with the same or equivalent levels of control over the rest of the network. 

The Need for Consensus

Blockchain, essentially a distributed record of transactions, is maintained by individual miners with no central authority to offer oversight and confirm the correctness of entries. Ultimately, there is a need for consensus on the precise status of the network at any given time. 

However, obtaining this consensus across several nodes attempting to cooperate remotely is a problematic undertaking, made more difficult by the possibility of an unpredictable number of nodes malfunctioning or purposefully acting against the network's interests, as proven by the Byzantine Generals' Problem. 

Bitcoin (BTC), Ethereum (ETH), and other cryptocurrencies use technical solutions such as proof-of-work and proof-of-stake algorithms to assure network consensus about which transactions occurred and when without depending on central enforcement of the rules.

Further Explaining the Concept of Consensus

Public blockchains operate worldwide as decentralized, self-regulating networks with no central authority. They entail contributions from hundreds and thousands of participants who work on verifying and authenticating blockchain transactions and block mining activities. 

In the face of the blockchain's dynamically changing status, these publicly shared ledgers require an efficient, fair, real-time, operational, reliable, and secure mechanism to ensure that all transactions happening on the network are legitimate and all participants agree on a consensus on the ledger's status. 

The consensus mechanism carries out this critical role, a system of rules that decides the legality of contributions made by the blockchain's various participants (i.e., nodes or transactors).