blockchain technology</strong></a>, becoming the most crucial tool in <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-cryptocurrency/">cryptocurrency development and utilization.</p>\n<p>The consensus mechanism is the foundational technology for <strong>block verification</strong>. It created the outline for conditions that the network <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">nodes and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-validator/">validators must meet in order to create and verify new blocks on the blockchain.</p>\n<p>There are numerous consensus mechanisms that require different software and hardware. However, their key principle is to help build a <strong>decentralized public ledger</strong> that makes up the blockchain.</p>\n<p>The first consensus mechanism developed specifically for blockchain technology was <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-work-pow/">Proof-of-Work (PoW)</strong></a>. It was launched alongside the Bitcoin blockchain. Given some of its technical limitations and hardware requirements, developers started working on new concepts of consensus mechanisms.</p>\n<p>This led to the development of mechanisms that have become as popular as PoW, such as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake (PoS)</strong></a>, which is employed by Ethereum, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-proof-of-authority-poa/">Proof-of-Authority (PoA)</strong></strong></a>, used by VeChain, and Proof-of-Staked-Authority (PoSA) on the <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/binance/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Binance</strong></a> Smart Chain. Each method ensures agreement between the network nodes to validate transactions and create new blocks on the chain.</p>\n<p>Blockchain protocols are unable to properly function without consensus algorithms. As the name suggests, this technology ensures consensus is maintained between all nodes working in the network and that all nodes follow the same set of rules.</p>\n<p>Furthermore, <strong>consensus algorithms provide security to blockchain users</strong>. Invalid transactions are kept out of the blocks by node validators that follow the predetermined consensus algorithm rules. Consensus mechanisms allow multiple transactions to be managed and validated in a very short time window.</p>\n<p>In order to validate a transaction and add it to the block, all nodes must reach a consensus. Blockchain networks are <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralization/">decentralized, therefore all node operators share an equal distribution of responsibility. The consensus mechanism can successfully function even if some of the nodes are malfunctioning or maliciously acting against completing the tasks.</p>\n<p>The consensus algorithm technology is a practical example of a theoretical problem known as the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-byzantine-generals-problem/">Byzantine Generals' Problem</strong></a>. It poses the question of whether a computer network can achieve a consensus in a network of independent, decentralized nodes when some of the nodes are malfunctioning for one reason or another.</p>","level":"medium","meta_title":"What is Consensus Mechanism? 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Pulls?","featured_image_id":6555,"status":"published","chapter_id":7,"language":"en","order":10,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/how-to-avoid-rug-pulls-in-crypto","featured_image":{"id":6555,"uuid":"80cbed9d-3b4b-45d9-9a85-d2d8108c0f32","public_url":"https://assets.bitdegree.org/crypto/storage/media/how-to-avoid-rug-pulls.o.jpg","path":"crypto/storage/media/how-to-avoid-rug-pulls.o.jpg","original_path":"crypto/storage/media/how-to-avoid-rug-pulls.jpg","name":"how-to-avoid-rug-pulls.o.jpg","original_name":"how-to-avoid-rug-pulls.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"111.99KB"},"youtube_video":null},{"slug":"how-to-avoid-crypto-taxes","title":"The Key Legal Techniques of Avoiding Crypto 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Terms","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/crypto-101-glossary.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}],"nextSection":{"id":193,"original_id":null,"author_id":41,"translator_id":null,"title":"What is Consortium Blockchain?","slug":"what-is-consortium-blockchain","section":"C","keyword":"Consortium Blockchain","status":"published","definition":"a privately owned blockchain where the information is not publicly available outside the consortium.","content":"<p>A <strong>consortium blockchain</strong> is a type of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchain network</strong></a> that is typically used by corporations and groups to share information on a blockchain without making it open to the public. It can be seen as an intermediary between <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-public-blockchain/">public and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-private-blockchain/">private blockchains.</p>\n<p>Public blockchain networks are the most popular type of this technology. The Bitcoin blockchain, the first blockchain in the world, was designed to be public. This blockchain type is popular among other <strong>decentralized cryptocurrency blockchains</strong>, like <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum or Tezos. Public blockchains are permissionless and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralization/">decentralized, thus accessible to all willing participants.</p>\n<p><strong>Private blockchain networks</strong> are primarily designed by corporations and can only be accessed within the organizational structure. No outside users can access private blockchains. This model is typically managed by a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-centralized/">centralized authority</strong></a>.</p>\n<p>Consortium blockchain networks fall in the middle between the features of public and private networks. They are designed and used by groups of companies, allowing&nbsp;them to employ a decentralized network within the consortium. Similar to private networks, no actors outside the consortium can access the blockchain.</p>\n<p>Consortium blockchains are more decentralized than private blockchain networks. All companies within the consortium are independent and equal network members. As in public networks, all consortium members act as nodes within the network with an even level of authority.</p>\n<p>However, unlike public networks, consortium blockchains restrict any outside access to the network. This way, the private corporate data of the corporations are protected, and the network load is smaller since the number of nodes is kept relatively low without outside interference.</p>","level":"easy","meta_title":"What is Consortium Blockchain? Definition & Meaning | Crypto Wiki","meta_description":"Consortium Blockchain meaning: Consortium Blockchain - a privately owned blockchain where the information is not publicly available outside the consortium.","meta_keywords":null,"language":"en","created_at":"2022-02-24T13:13:49.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-consortium-blockchain"},"prevSection":{"id":191,"original_id":null,"author_id":40,"translator_id":null,"title":"What is Confirmation?","slug":"what-is-confirmation","section":"C","keyword":"Confirmation","status":"published","definition":"When a cryptocurrency transaction is included in a block on the blockchain, it is regarded as confirmed.","content":"<p><strong>Confirmation is a feature that certifies or proves the truth of something.</strong> For example, confirming that your order has arrived. Besides, this is the last proof.</p>\n<p>Looking from the perspective of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-cryptocurrency/">cryptocurrencies, confirmation is defined as the number of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-block/">blocks that have gone through after the transaction was uploaded to a coin's blockchain. The security is determined by the number of confirmations.</p>\n<p>An <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-zero-confirmation-unconfirmed-transaction/">unconfirmed transaction</strong></a> is the one that is <strong>waiting to be added to the blockchain</strong> by miners. Following the initial block, each subsequent block is added, leading to one confirmation. This implies that if one confirmation takes ten minutes, six confirmations might take an <strong>hour</strong>, and so forth.</p>\n<p>They are gathered in the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-mempool/">mempool, which is a backlog of all presently unconfirmed transactions.</p>\n<p>Speaking about smaller confirmations, these take place after the buyer and seller agree to wait for zero transactions. Larger transactions wait for more blocks.</p>\n<p>When an unconfirmed transaction makes it into a newly mined block, it obtains a confirmation. Following that, <strong>each new block uploaded to the chain serves as an extra confirmation</strong> for the transaction. Thus, if a transaction was verified in block 348202 and the current <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-block-height/">block height</strong></a> is 348207, it has six confirmations.</p>\n<p>Each exchange and retailer must determine the number of confirmations required for each currency. The number of confirmations that have to be <strong>100%</strong> secure grows with time.</p>\n<p>The amount of confirmations is significant for security purposes. If a hacker wishes to target the blockchain by feeding it fake transaction information, they must breach the security of each individual block in exact sequence. <strong>Beginning with the most recent one in the chain.</strong></p>\n<p>The more blocks mined since a certain transaction occurred, the more difficult it is for a hacker to break through all of them and reverse that transaction.</p>\n<p>For example, with <a href=https://www.bitdegree.org/"/crypto/buy-bitcoin-btc/">Bitcoin, a new block is added every 10 minutes.</strong> Therefore, there will be one confirmation every 10 minutes. Meaning that it will begin after an unconfirmed transaction is added.</p>\n<p>Most crypto companies that handle customer transactions, such as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-wallet/">wallets and <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-exchange/">exchanges, need a minimum of three confirmations before acknowledging a transaction as genuinely <strong>legitimate and permanent</strong>.</p>","level":"medium","meta_title":"What is Confirmation? Definition & Meaning | Crypto Wiki","meta_description":"Confirmation meaning: Confirmation - When a cryptocurrency transaction is included in a block on the blockchain, it is regarded as confirmed.","meta_keywords":null,"language":"en","created_at":"2022-02-24T06:07:52.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-confirmation"},"currentChapter":"C","currentSection":"what-is-consensus-mechanism","chapterTitle":"C","readingLevel":"medium"},"url":"/crypto/learn/crypto-terms/what-is-consensus-mechanism","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">
Handbook Cover Page
Crypto Terms: Letter C

What is Consensus Mechanism?

Consensus Mechanism MEANING:
Consensus Mechanism - the technology required for the main blockchain functionalities.
Medium
2 minutes

Let's find out Consensus Mechanism meaning, definition in crypto, what is Consensus Mechanism, and all other detailed facts.

The term Consensus Mechanism, also referred to as consensus algorithm, describes a computer technology used for information processing. Consensus mechanisms have been adopted for blockchain technology, becoming the most crucial tool in cryptocurrency development and utilization.

The consensus mechanism is the foundational technology for block verification. It created the outline for conditions that the network nodes and validators must meet in order to create and verify new blocks on the blockchain.

There are numerous consensus mechanisms that require different software and hardware. However, their key principle is to help build a decentralized public ledger that makes up the blockchain.

The first consensus mechanism developed specifically for blockchain technology was Proof-of-Work (PoW). It was launched alongside the Bitcoin blockchain. Given some of its technical limitations and hardware requirements, developers started working on new concepts of consensus mechanisms.

This led to the development of mechanisms that have become as popular as PoW, such as Proof-of-Stake (PoS), which is employed by Ethereum, Proof-of-Authority (PoA), used by VeChain, and Proof-of-Staked-Authority (PoSA) on the Binance Smart Chain. Each method ensures agreement between the network nodes to validate transactions and create new blocks on the chain.

Blockchain protocols are unable to properly function without consensus algorithms. As the name suggests, this technology ensures consensus is maintained between all nodes working in the network and that all nodes follow the same set of rules.

Furthermore, consensus algorithms provide security to blockchain users. Invalid transactions are kept out of the blocks by node validators that follow the predetermined consensus algorithm rules. Consensus mechanisms allow multiple transactions to be managed and validated in a very short time window.

In order to validate a transaction and add it to the block, all nodes must reach a consensus. Blockchain networks are decentralized, therefore all node operators share an equal distribution of responsibility. The consensus mechanism can successfully function even if some of the nodes are malfunctioning or maliciously acting against completing the tasks.

The consensus algorithm technology is a practical example of a theoretical problem known as the Byzantine Generals' Problem. It poses the question of whether a computer network can achieve a consensus in a network of independent, decentralized nodes when some of the nodes are malfunctioning for one reason or another.
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