Consensus mechanisms

With no central bookkeeper, a blockchain needs a way for all its computers to agree on which blocks are valid. That method is called a consensus mechanism. It decides who gets to add the next block and what stops them from cheating. The three you’ll hear about most are proof of work, proof of stake and proof of authority.

• Proof of work: computers called miners race to solve a hard math puzzle. The winner adds the next block and earns new coins. Cheating would take a huge amount of computing power, which keeps the network honest but uses a lot of electricity. Bitcoin works this way.
• Proof of stake: validators lock up some of the network’s own tokens as a deposit, called a stake. The network picks validators to propose and check blocks, and pays them rewards. On many networks, including Ethereum, a validator that breaks the rules can lose part of its stake. Ethereum, Solana and Algorand all use forms of proof of stake. See Staking.
• Proof of authority: a small, fixed group of known and approved validators adds the blocks. It’s fast and cheap, but you have to trust that group, so it’s mostly used on private blockchains.

Each approach is a trade-off between security, speed, cost and who you have to trust. That’s why it matters: the consensus mechanism tells you what keeps a blockchain honest, and what would have to fail for it to go wrong. How much that matters to you depends on how much value you, or your clients, rely on that network for.