If you’re a cryptocurrency user, it’s worth your while to understand the blockchain consensus mechanism that runs behind the scenes. It is the foundational technology that keeps the entire crypto market synchronized and safe, and also what allows us to trust each other in a decentralized system.
Consensus mechanisms are the rules that govern how a blockchain network arrives at an agreement on a single data set. They are what allows a distributed network of computers to verify the legitimacy of transactions and block creations in a blockchain, and they act as the verification standards through which all information that gets added to the blockchain is verified before it can be approved and stored on the blockchain.
As a general rule, the consensus mechanism should only add new data to the blockchain if two thirds of all full nodes of the network agree with it. This is a crucial requirement for maintaining the integrity of blockchain and preventing malicious attacks such as double spending. This is the same reason why your dad can’t unilaterally declare eminent domain on your Monopoly property – only the majority of other players in the game have to agree that he is acting in his capacity as a landowner.
To achieve this, a consensus mechanism uses a combination of different factors to determine whether the block is valid or not. These factors can include a proof of work, which is one of the earliest consensus algorithms that is used by popular blockchains such as Bitcoin and Ethereum, or proof of stake, which rewards users with newly generated tokens for authenticating transactions. It can also be based on the amount of time that the node has been part of the network, the number of tokens it has, or the amount of energy that has been put into mining that particular coin.
A key challenge is to find a consensus mechanism that works well on resource-constrained devices, such as the billions of IoT systems that require very little computational power. This is because current consensus mechanisms like PoW require massive computing power to function, which will consume huge amounts of energy.
This is an area that needs a lot of research and development. For example, using AI to optimize the mining process can help reduce the amount of energy that is needed to produce each new block on a blockchain. This could be a significant step towards making the blockchain more energy efficient and therefore more viable for IoT systems. As the technology evolves, it’s likely that more innovative consensus mechanisms will be developed to tackle this growing challenge. This will have a significant impact on the future of blockchain technology and the IoT industry. In short, consensus mechanism are a critical component for the success of blockchain technology and the broader IoT industry. They are the underlying technology that enables us to trust each other on a decentralized basis and trade freely across borders. Without them, the blockchain and IoT would not be possible.
