What Is a Blockchain Consensus Algorithm?

blockchain consensus algorithm

Any centralized system, such as a database containing essential information about marriage licenses in a jurisdiction, requires a centralized administrator with the authority to maintain and keep the database. It is the responsibility of the central authority, which is ultimately responsible for keeping accurate records, to make any changes, such as adding, removing, or updating the names of those who have met the requirements for certain permits.

Public blockchains that are decentralized and self-regulating can function on a global scale with no central authority. A large number of individuals contribute to them by helping to validate and authenticate blockchain-based transactions through block mining.

Blockchain consensus algorithm

Blockchain technology is rapidly changing the way we interact with data and the world of finance. One of the key components that make blockchain systems reliable and secure is the consensus algorithm. In this article, we will explore what a blockchain consensus algorithm is and how it works.

A consensus algorithm is a set of rules that are followed by all participants in a blockchain network to maintain agreement on the state of the shared ledger. It is the mechanism that ensures that all nodes in the network have the same view of the data and that transactions are validated and added to the blockchain in a secure and decentralized manner.

Types of blockchain consensus algorithm

Blockchain consensus algorithms have a long and varied history. The earliest incarnation of proof-of-work (PoW) was used to secure Bitcoin, with Satoshi Nakamoto introducing the concept in 2008. Other consensus algorithms such as Proof-of-Stake (PoS) and Delegated Proof-of-Stake (DPoS) have since emerged, offering alternatives to PoW. Each of these algorithms offer distinct advantages and disadvantages, ensuring that developers have a variety of options when selecting a consensus mechanism for their blockchain. Ultimately, each consensus algorithm is unique to the network that uses it, and selecting the right one can have a major impact on both the speed and security of a cryptocurrency network. Some of the most commonly used consensus algorithms include:

-Proof-of-Work (PoW)

-Proof-of-Stake (PoS)

-Delegated Proof-of-Stake (DPoS)

-Proof-of-History (PoH)

-Byzantine Fault Tolerance (BFT)

-Directed Acyclic Graph (DAG)

Proof-of-Work (PoW)

Proof-of-Work is a consensus algorithm that was first introduced with the creation of Bitcoin in 2009. It is designed to be computationally intensive, requiring nodes to perform complex mathematical calculations in order to validate transactions and add them to the blockchain. The first node to solve the calculation and find the correct solution is rewarded with a certain number of tokens or cryptocurrency.

The computational work that is performed by the nodes is called mining. The process of mining helps to ensure the security of the network by making it difficult for a single node to manipulate the data on the blockchain. The idea behind Proof-of-Work is that the more computing power that is added to the network, the more secure it becomes.

Proof-of-Work is a very secure and reliable consensus algorithm, but it has several drawbacks. It requires a large amount of computing power and energy, which can be expensive and environmentally damaging. Additionally, the process of mining can be slow and inefficient, leading to slow transaction times and increased fees. Cryptocurrencies that use PoW include Bitcoin (BTC), Dogecoin (DOGE), Litecoin (LTC), Monero (XMR), and Zcash (ZEC).

Proof-of-Stake (PoS)

Proof-of-Stake is a newer consensus algorithm that was developed as an alternative to Proof-of-Work. Instead of requiring nodes to perform complex calculations, Proof-of-Stake relies on nodes holding a certain amount of tokens or cryptocurrency as collateral. This collateral is used to validate transactions and add them to the blockchain.

The validation process in Proof-of-Stake is much faster and more energy-efficient than Proof-of-Work. Nodes are randomly selected to validate transactions, and the more tokens that they hold, the higher the likelihood that they will be selected. This incentivizes nodes to hold more tokens and maintain the security of the network.

Proof-of-Stake is a promising alternative to Proof-of-Work, but it is not without its own drawbacks. Some people argue that it is less secure than Proof-of-Work, as the validation process is not as decentralized. Also, there is the possibility of a single entity holding a large percentage of tokens, which could lead to the centralization of the network. Some cryptocurrencies that use proof of stake are Ethereum (ETH), Tezos (XTZ), EOS (EOS), and Cardano (ADA).

Delegated Proof-of-Stake (DPoS)

Delegated Proof-of-Stake is a variant of Proof-of-Stake that was developed to address some of the challenges associated with the standard Proof-of-Stake algorithm. In DPoS, nodes are selected to validate transactions and add them to the blockchain based on the number of votes that they receive from other nodes in the network. The idea behind DPoS is that the nodes with the most votes are the most trusted and reliable, and therefore should be the ones responsible for validating transactions.

DPoS is a fast and efficient consensus algorithm, as it only requires a small number of nodes to validate transactions. However, it is also considered less secure than Proof-of-Work or Proof-of-Stake, as the selection of validating nodes is based on the number of votes that they receive, rather than on the amount of computing power or tokens that they hold. Some DPoS cryptos are Tron (TRX), EOS (EOS), and Steem (STEEM)

Proof-of-History (PoH)

Proof-of-History (PoH) is a consensus algorithm that seeks to provide an alternative to traditional blockchain technologies. By incorporating time itself into the blockchain, Proof-of-History (PoH) is a consensus mechanism that reduces the burden on network nodes during block processing. Nodes have their own internal clocks, which are used to validate time and events. Proof-of-History is still in its early stages of development, and it is not yet widely used in the cryptocurrency industry. The Proof of History algorithm is used only on the Solana blockchain. Because of this, the network is extremely scalable, handling up to 60,000 transactions per second.

Byzantine Fault Tolerance (BFT)

BFT consensus algorithms are designed to reach consensus in a blockchain network even if some nodes are unreliable or acting maliciously. They are commonly used in permissioned blockchain networks, where all nodes are known and trusted, as opposed to public blockchain networks where nodes are anonymous and untrusted.

The most popular BFT consensus algorithm is called Practical Byzantine Fault Tolerance (PBFT). PBFT works by having a designated leader node, known as a primary, which is responsible for collecting and broadcasting transactions to all other nodes in the network. Each node in the network verifies the transactions and sends a message to the primary to either approve or reject the transactions. Once more than two-thirds of the nodes have approved the transactions, the primary can add the transactions to the blockchain.


Proof of importance is a method for validating a node’s contribution to a cryptocurrency network and earning the right to generate new blocks. One advantage of PoI over other consensus algorithms is that it allows for a more equitable distribution of rewards in the network. Unlike PoW, which rewards nodes based solely on their computational power, or PoS, which rewards nodes based solely on the number of tokens they hold, PoI takes into account a variety of factors that contribute to the overall health and well-being of the network.

Why cryptocurrencies use consensus mechanisms

Cryptocurrencies need consensus algorithms to ensure that the network is secure, reliable, and trustworthy. Consensus algorithms allow network nodes to agree on the validity of transactions, ensuring that all participants are in agreement about the state of the blockchain. This helps prevent double-spending, malicious activities, and other security issues from arising on a cryptocurrency network. It also ensures that transactions are processed quickly and efficiently so they can be confirmed in a timely manner. Finally, consensus algorithms help incentivize users to stay engaged in the network by providing rewards for validating transactions or maintaining their nodes.


In summary, the blockchain consensus algorithm is a cornerstone of blockchain technology, providing the foundation of trust and security upon which the entire blockchain ecosystem is built.  It is responsible for verifying transactions, creating new blocks, and maintaining the consensus among nodes in the network. With its decentralized and tamper-proof nature, the consensus algorithm provides trust and transparency to the users of the blockchain. The innovation and evolution of blockchain consensus algorithms continue, as developers seek to create algorithms that are more energy-efficient, scalable, and secure. It is a constantly evolving field, so we can expect to see many exciting advancements in the years to come.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.


How does the choice of consensus algorithm impact the overall functioning of a blockchain network?

The choice of consensus algorithm has a significant impact on the overall functioning of a blockchain network, affecting factors such as security, scalability, energy consumption, and others.

In what scenarios is one consensus algorithm more suitable than the other?

The suitability of a consensus algorithm depends on the specific requirements and use case of the blockchain network, such as the desired level of security, scalability, and energy efficiency.

What other consensus mechanisms are there in the blockchain?

Other blockchain consensus mechanisms include Proof of Activity (PoA), Proof of Importance (PoI), Proof of Capacity (PoC), and Proof of Elapsed Time (PoET).

What is the best consensus mechanism in blockchain?

The best consensus mechanism in blockchain is still a matter of debate, as each algorithm has its own unique benefits and drawbacks. But Proof-of-Work (PoW) is the most widely used consensus mechanism in blockchains.

Alden Baldwin

Alden Baldwin

Journalist, Writer, Editor, Researcher, and Strategic Media Manager: With over 10 years of experience in the digital, print and public relations industries, he has been working with the mantra, Creativity, Quality and Punctuality. In his waning years promises to build a a self sustaining institute that provides free education. He is working towards funding his own startup. As a technical and language editor, he has worked with multiple top cryptocurrency publications such as DailyCoin, Inside Bitcoins, Urbanlink Magazine, Crypto Unit News and several others. He has edited over 50,000+ articles, journals, scripts, copies, sales campaign headlines, biographies, newsletters, cover letters, product descriptions, landing pages, business plans, SOPs, e-books, and several other kinds of content.

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