Block Chain - Consensus Mechanisms

Definition:
In a blockchain, there’s no central authority (like a bank) to confirm which transactions are valid.
A consensus mechanism is the method by which all participants (nodes) in the network agree on the correct version of the blockchain ledger.
Why it’s important:
Without consensus, people could cheat (e.g., spend the same coin twice, called double spending). Consensus ensures everyone trusts the blockchain data.

Proof of Work (PoW)
- Used by: Bitcoin, early Ethereum
- Miners compete to solve complex math puzzles using computing power.
- The winner adds the new block and earns a reward (e.g., Bitcoin).
- Pros: Highly secure, proven over time.
- Cons: Energy-intensive, slower transactions.
Proof of Stake (PoS)
- Used by: Ethereum (after upgrade), Cardano, Solana
- Validators are chosen based on how many coins they "stake" (lock up as collateral).
- Randomized selection + staking power decides who adds the block.
- Pros: Energy-efficient, faster, scalable.
- Cons: Rich participants (big stakers) may gain more influence.
Delegated Proof of Stake (DPoS)
- Used by: EOS, Tron
- Token holders vote for a small group of delegates/validators.
- These delegates produce blocks on behalf of everyone.
- Pros: Very fast, efficient.
- Cons: Less decentralized, since only a few validators run the system.
Proof of Authority (PoA)
- Used by: Private/consortium blockchains, VeChain
- Validators are chosen based on reputation and identity (not coins or power).
- Pros: Fast, efficient.
- Cons: Centralized, relies on trusted validators.

Imagine a group of friends keeping a shared notebook of expenses:

With PoW, everyone solves a puzzle before writing in the notebook (slow, but secure).
With PoS, the friend who has put the most money in the group fund gets the chance to write (faster, efficient).
With DPoS, the group votes for 2–3 trusted friends to keep the notebook on their behalf (very fast, but less fair).