Consensus Mechanism

If you are in love with Bitcoin and Cryptocurrency, its important that you understand what is consensus mechanism and what are the different types of consensus mechanism. We all know that crypto is based on blockchain technology. How are the transactions verified in a blockchain ? The answer to it is Consensus Mechanism. It helps in validating the authenticity of transactions and maintaining the security of the blockchain. The crux of blockchain itself is securing data and verifying the unique identity.
If we get into a bit tech part, the consensus mechanism simply helps in guaranteeing all the nodes in the network are in synchrony. Different types of consensus mechanism produce different kinds of results. Therefore it becomes very important for a blockchain developer to choose the right one. Blockchain builders even work in reverse direction to find out the most optimum consensus mechanism.

Lets look at the different types of Consensus Mechanism

  1. Proof of Work

It is the first type of consensus mechanism used by the daddy cryptocurrency- Bitcoin. It is also known as mining in layman language and the nodes are known as the miners. The miners are required to solve complicated mathematical equations that require heavy computational energy. The computational power is a combination of CPU, GPU, FPGA, mining pools, ASIC mining, etc. If the miner is the first one to solve a set of puzzles, he receives a block as an reward. Mind you! The puzzles are not so easy to solve, they are a process of trial and error. The more the computational energy, the more efforts can be put to solve it and faster the miner will get the reward.
The difficulty of the puzzles is directly proportional to the speed of addition of new blocks. If the blocks are created fast, the difficulty will increase and vice versa. Hence the miners have to adjust the time frame of creating new blocks carefully so as to adjust the difficulty level of the equations.
This method is highly criticized because of the amount of energy it consumers. There have been several debates regarding this and hence newer blockchain networks do not use this method.

2. Proof of Stake

In this process the users of the network lock their tokens for a certain period of time to become validators. Users can produce blocks after they become validators. In Proof of Stake, there is a random selection process for selecting which validator produces the next block. Some blockchains even have a set of designs to select the validator. In general practice, the one with the highest stake or Hodls the coins for the longest period, has greater chances of creating a new block. Validators get rewarded for any work with full or a part of the transaction fees of the transaction carried out in the block they created, they may receive a specific amount of coins because of inflation. It is also more energy efficient as compared to Proof of Work.
Example of a POS Blockchain- Cardano

Delegated Proof of Stake
It is a branch of Proof of stake, where the user can stake their token and vote for a delegate. The weight of the user’s vote is based on the number of coins staked.
For example:
Lets assume that for a delegate-
A user Raghav stakes 500 coins
Another user Akshay stakes 800 coins.
Then obviously here Akshay’s vote will have more weight as compared to that of Raghav.
The delegate with the highest number of votes will produce the block. He will be rewarded in a similar way as POS for the transaction fees of the transaction carried out in the block they created.
This method is also known as Digital Democracy owing to its stake-weighted system. It is one of the fastest mechanism capable of handling a high number of transactions.

3. Proof of Capacity

The proof of capacity method makes use of the computers storages device like hard disk instead of the computational power. Complex mathematical puzzles are stored in the hard disk. The process is known as plotting. Once the storage is filled with the puzzles, the user can use it to produce new blocks. In simple the POC, stores a list of possible solutions even before the mining activity commences. Here the miners chances of adding a block are dependent on the amount of storage he has. The more the storage, the more chances the miner has to match the solution.

4.Proof of Elapsed Time

This method selects a user for adding a block, based on the time he has spent waiting on the network. The mechanism provides a random wait time for the users and those who wait till the times is elapsed, get to add the new block. The Proof of Elapsed time has certain limitations, as it will have to verify that no user is running multiple nodes and the wait time is actually random.

5. Proof of Identity

It is a consensus mechanism in which every unique user receives one equal unit of voting power and rewards. The private key of a user is authenticated with an authorized identity. IT provides a unique identity to the person as the private key is cryptographically attached to a specific transaction. It helps ensure integrity and authenticity of the data. This type of a blockchain can be used for verification of identity of a country’s citizens.

6. Proof of Authority

POA is a mechanism based on identity as a stake. It can be said that its a combination of Proof of Stake and Proof of Identity. The reputation of the validator is staked on the network. Only the nodes which become validators are allowed to add blocks. The number of validators in the mechanism is comparatively low, around 25 or less. The validators are rewarded for for securing and validating the transactions in the network.

7. Proof of Activity

It is a hybrid of Proof of Work and Proof of Stake. The mechanism tries to pick the advantages and eliminate the disadvantages of both to generate and validate new blocks. The blocks created in Proof of Activity are like simple templates having a header information along with the mining reward address. The header information helps find a random group of validators for signing a block. The validator with a larger stake will have a greater chance to add a block by solving puzzles and in turn earn rewards.


Different blockchain mechanism provide similar goals but they have different approach. The technology is evolving everyday and we see improvements in each mechanism to cater the needs of a blockchain better. It is important for decision makers to pick a consensus mechanism which will be optimum for their business.

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