Types of Consensus Mechanisms: What You Need to Know

What Are the Types of Blockchain Consensus Mechanisms

Since Bitcoin’s first hype in 2017, many cryptocurrencies have emerged, each offering a shaky balance between speed, decentralization, and security. For it to work, the blockchain networks use consensus algorithms that verify the transactions and guarantee that all the nodes on the network are synchronized.

From Pow to PoH, today we will briefly explain every major consensus mechanism on the market and what makes each of them stand out.


Proof of Work (PoW)

It was created to solve the burning problem of spam emails. Now it is used for adding new blocks of transactions to a blockchain.

With Proof of Work, every block of transactions has its specific hash and long strings of numbers that serve as proof of work. To validate a block, a miner’s computer has to generate a valid target hash. Moreover, its main aim is to do that first. The rewards are newly minted crypto coins and transaction fees.

The process is a trial and error that solves a hard puzzle. As the network sets the difficulty automatically, success generally depends on a miner’s computational power. 

Proof of Stake and DPoS

Unlike PoW, Proof of Stake doesn’t require miners. The creator of the new block is chosen by staking — the process of locking up crypto holdings to get rewards and earn interest. The stake is measured by the amount of owned currency, length of ownership, and other factors. 

You lock your coins from trading, so they are used for verifying transactions. The algorithm selects a validator who adds a new block of transactions and receives a reward. The PoS algorithm rewards you for sticking up with the coin.

The Delegated Proof of Stake works similarly, but instead of leaving everything to the algorithm, the users elect delegates and witnesses. The witnesses perform the block validation, while delegates are responsible for the governance of the blockchain.

Proof of Activity (PoA)

Proof of Activity is an attempt to combine Proof of Stake and Proof of Work algorithms. The process of mining is similar to PoW. The computers on the network attempt to solve a cryptographic puzzle to create a new block.

Once the block is created, it needs to be verified. That’s when the system switches to PoS. The algorithm requires a group of validators from the network that would sign the new block. The system chooses the next validators based on the amount of mined coins. Once the group is assembled, they sign the new block, and it gets “completed.”

Proof of Burn (PoB)

This consensus is closely related to PoW. Miners send their investments to a public address known as an “eater address,” from where they will never be able to recover their funds. 

The more they “burn,” the greater the mining power is reached. In exchange, they get a reward in the native currency token of the blockchain. All of this burning activity on the blockchain keeps the network working and running.

Proof of Capacity

Proof of Capacity is a mining algorithm that uses hard drive space on the device to store a list of possible solutions. First, during the process of plotting (repeated hashing of data), the list of all possible values is created.

Secondly, the miner calculates a scoop number. The process happens repeatedly until the block is forged within the deadline.


Proof of History (PoH)

It uses a computational sequence to verify a period of time between two events. It is similar to Proof of Stake, except it uses different functions to calculate time.

Each transaction is presented as an event that takes the output of one transaction and uses it as input for the next one. This creates a chain of transactions with validators working just like in PoS.

Why Blockchains Need Consensus Mechanisms

Despite their variety, consensus mechanisms all amaze with their innovations. They have different principles of work, but just like USDT to TRX and BTC to ADA conversions, they keep the crypto industry afloat.