Grassroot Crypto Education (Vol.10) - Consensus Mechanism
It's the 10th volume of our grassroot crypto education, we have come this far and it's amazing. Thanks to everyone that has been a part of the journey and particularly, my warm regards to the community, @steemkidss to have allowed us to run the program in the community. For today's edition, we are going to look at an important topic in cryptocurrency. Stay with me on this.
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Consensus Mechanism
To talk about consensus mechanism, we must briefly talk about what consensus itself entails, the term consensus means general agreement, meaning different elements coming together to reach common ground on a particular context to verify its authenticity. Consensus is practiced in different sectors, community judgment on upvoting content on Steemit can be termed a form of consensus mechanism when users come together to upvote a content and certify that it's beneficial to the community members.
That said, the Consensus mechanism is an important concept in a cryptocurrency network where interconnected computers verify the authenticity of a transaction on the network. In addition, a series of computers connected on the network reach a consensus on a particular transaction to ensure an honest conclusion is reached before the transaction can be added to a valid block on the blockchain. That's why transactions on a crypto network pass through confirmation stages before a consensus is reached.
Consensus mechanism in cryptocurrency ensures that transactions carried out on the blockchain are legit and free from any form of tricking the system. If consensus was not reached on a transaction on a crypto network, it means the transaction is not genuine, and as such can't be added to the blockchain. On the Bitcoin network, those that are responsible for reaching a consensus on the network are often regarded as miners, that validate transactions.
The consensus mechanism utilized in Bitcoin and Ethereum is Proof of Work (PoW), that's the earliest consensus mechanism, and others like Proof of Stake (PoS) utilized on the Cardano (ADA) network. We would be talking about two consensus mechanisms in this context today.
Proof of Work Consensus Mechanism
Proof of Work (PoW) consensus mechanism is the first to be utilized in the crypto ecosystem, this is what is being utilized on the Bitcoin network. Proof of Work requires miners to setup high power consumption machines to solve complex computational equations on the network before a transaction can be added to a valid block on the blockchain. The miners are rewarded with new Bitcoins for the work of validations that have been carried out on the Bitcoin network.
PoW does not only serve the purpose of validating transactions in a decentralized manner but also secures the network from frivolous activities and at the same time, the mining of new cryptocurrencies in the process. We have spoken about circulating supply, total supply, and maximum supply in the previous lessons, on the Bitcoin network, the mining process is the way employed for new Bitcoin coins to be released into the asset's circulation. Being a good consensus mechanism, it has its inefficiencies and this would be discussed in the sections to follow. Let's take a look at the Proof of Stake in the section below.
Proof of Stake (PoS) Consensus Mechanism
A lot of shortcomings were associated with the PoW and this gave birth to another innovation, the Proof of Stake (PoS) consensus mechanism. In PoS, blocks are awarded to validators based on the amount of the coins they have staked on the network, that's where the name was derived. The stake of the users on the network is also like collateral to ensure that the users don't practice any form of dishonesty in validating transactions on the network.
Proof of Stake (PoS) consensus mechanism takes care of the excessive power consumption of the PoW while validators are selected based on their stakes to validate transactions, secure the network, and mine new crypto assets. This consensus mechanism is cheaper in use as compared to Proof of Work. Proof of stake consensus mechanism improves scalability and speed of transactions on the network of the crypto that utilizes this type.
Distinctive differences between Proof of Work (PoW) and Proof of Stake (PoS)
| Proof of Work | Proof of Stake |
|---|---|
| High computational machine is required for consensus. | The stake of validators on the network is used to award the blocks to them. |
| It requires high power consumption before consensus can be reached. | It requires less power consumption before consensus can be reached as there is no need for setting up a mining machine. |
| It's less scalable and takes a longer time before transactions are validated. | It is more scalable as compared to PoW as more transactions are handled on the network with improved speed. |
| Validations are more competitive as complex equations are to be solved before a miner wins a block. | Validators are selected at random based on their stakes while the blocks from each validator are added to the blockchain. |
Conclusion
In conclusion, the consensus mechanism is an important concept in a crypto ecosystem that explains the process by which transactions are validated, network security, and mining of new coins. Of course, it comes with different types and we have discussed some of them in this context, the earliest being PoW while PoS has been adopted in some networks to take care of scalability, low speed, and high power consumption problems associated with PoW. I have shared yet another important piece with you today and I hope you had a great read. I expect your participation sooner. Thank you.
Homework Task
- What is your understanding of Consensus Mechanism in Crypto Ecosystem? Briefly talk about the Proof of Work (PoW) and Proof of Stake (PoS) Consensus mechanisms.
- What are the distinctive differences between Proof of Work and Proof of Stake? State and discuss at least other two types of Consensus Mechanisms.
Guidelines
- Write an article of at least 250 words. Keep your explanation as simple as possible.
- Include the tag #grassroot-education10, #crypto, #steemexclusive, and your club status among the first 4 tags. Also, tag me @fredquantum in your homework entry.
- The participation in this lecture/homework task is open to everybody but only entries made by verified kids would be reviewed.
- I will check your articles and drop comments on the entries submitted now till 11:59 pm UTC, 26/03/2022.
Cc:-
@steemkidss
@fredquantum sir.
No task for the week ???
I have learnt a lot from your classes sir.
Hey professor review my entry thankyou!!
Thanks for this teaching sir.
I will be dropping my assignment soon.
Wonderful lecture as usual. Consensus Mechanism is an important topic that the kids need to learn. You have explained it well to the understanding of a lay man or an ordinary user. Let's see how it goes
Thanks for the lovely comment on the lecture, ma'am @ngoenyi. As you said, let's seen how things unfold. Do enjoy the rest of the day.
Her is my entry sir.
https://steemit.com/hive-139765/@david-o/grassroot-crypto-education-consensus-mechanism-10-to-steemkidsss