What Are Consensus Mechanisms?

Timothy Sevilleja
Feb 19, 2024


Cryptocurrency often finds itself being severely criticized due to various reasons. Its decentralization is a favorite topic of its critics. Decentralization opens the door for illicit activities like money laundering and terrorist funding. However, decentralization also serves as one of its greatest strengths, as the technology allows for measures that make transactions faster, less expensive, more secure, and ultimately more efficient. 

An illustration of the Proof of Work consensus mechanism of top cryptocurrency Bitcoin
Bitcoin Proof of Work Illustration from Bitcoin.com

Consensus Mechanisms: What are they? 

Consensus mechanisms are programs that allow distributed systems to work together in a secure manner. They are also referred to as either consensus protocols or consensus algorithms, although these are really more of classifications rather than interchangeable terms (more on this later). In simpler words, they ensure that the transactions occurring in the network are legitimate and agreed upon by the participants in the network. 

For centralized databases, there is usually a central administrator who has authority over the data and has the capability to alter and update it. Consensus mechanisms accomplish this task autonomously via decentralized systems like the blockchain.

Types of Consensus Mechanisms

There are different types of consensus mechanisms, classified by their different ways of ensuring consensus, among other distinctions. The most common ones are listed down below: 

Proof-of-Work (PoW) is the most popular and well-known consensus mechanism being used in the blockchain. Also known as mining to some, the process involves miners solving puzzles in order to be able to create new blocks of transactions on the blockchain. Submitting the proof that the puzzle has been solved is the "proof-of-work" in question. This process requires an increasingly large amount of processing power and is thus expensive, because of the increasing number of miners participating in the network. By far the most prominent blockchain that uses PoW is Bitcoin's. For that particular PoW, a block is generated every 10 minutes on average. The mechanism works by adjusting the difficulty of mining according to the speed of the miners; hash computations get harder as miners are getting faster, and get easier when the mining gets too slow. 

Proof-of-Stake (PoS) is the low-energy, low-cost alternative to PoW. Here, validators simply stake their coins (or offer their coins as collateral) in order to participate, with a randomized process deciding which validator gets to generate new blocks. Validators who hold larger stakes and/or have had stakes for longer periods of time have greater chances of creating new blocks. The security for this particular mechanism requires validators to own 51% of the total staked coin in order to defraud the chain.

Delegated Proof-of-Stake (DPoS), meanwhile, is very similar to PoS, but with an added feature. Here, the network users vote for delegates who can validate the transaction. Network users vote by staking/linking (but not transferring) their coins to a specific delegate. These chosen validators are also picked according to their reputation. 

Proof-of-Capacity (PoC) is when solutions are stored in digital storages in a process called plotting. These solutions can then be used to create new blocks. Users who can find solutions the fastest get the chance to create new blocks. As such, users with bigger storage capacities have a larger chance of producing new blocks. 

An example of a coin utilizing PoC is newcomer, Chia. The Chia blockchain comes up with a random number with which miners have to match. Miners then store random numbers in their storages in hopes of matching the blockchain. As such, the larger the storage, the more numbers stored, and the more chances of matching the random number. 


With that, which one of these is best? All of them certainly have their respective pros and cons.

PoW is the very first (and is hence the most popular) consensus protocol and is the most versatile one. However, miners constantly need more and more computing power in order to one-up each other, making it rather costly. PoS, meanwhile, has no need for such computing power and is thus less expensive. It is still prone to imbalances, however, as a user can stake an inordinate amount of coins and gain control of the system; in relation to this, users with more coins will naturally always hold the upper hand.

DPoS has all of the advantages of PoS but is more "fair", as in there are more opportunities for more users to reap rewards. To add, it also has secure real-time voting, wherein users can oust delegates for any sign of malicious activity. However, a small group can take control of the DPoS network more easily than PoS by getting hold of 51% of staking power. PoC can boast about its versatility, as it can use absolutely any hard drive. On the other hand, PoC is the least common and least popular among all the discussed mechanisms. It can also be affected by malware that affects regular hard drives. 


These are just some of the many types of consensus mechanisms being used in the blockchain. The technology is constantly evolving and is thus constantly adapting to changing user needs. There is still yet to be a universal, reliable consensus mechanism to be made, however. This is why a lot of efforts are being put into different layer protocols (Layer 0, 1,  2 and 3) to achieve decentralization, scalability, and security on the current blockchains that we have. 

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Timothy Sevilleja
Marketing Intern, Freelance Content Writer

Content writer for different publications across different genres.

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