Bolstering workers’ rights, improving medical recordkeeping, and accelerating payment processing, blockchain is finding more uses now than ever. However, many people hesitate before investing real money into any cryptocurrency.
How can people trust the system? The first step is understanding how blockchain consensus in the cryptocurrency market works. It’s quite an interesting topic, luckily enough.
At its core, blockchain consensus reaches the same goal as any monetary management system. Of course, it differs in many ways, but the outcome is almost identical.
Keep reading if you want to know exactly how any blockchain network works.
Blockchain Basics
You’ve likely heard of Bitcoin, Ethereum, Litecoin, or Dogecoin at this point. They’re popular cryptocurrencies that, instead of experiencing high 24-hour volatility, tend to jump and fall in price over longer periods of time.
While many coins have differences, they all lean against the same system for functionality, this being blockchain consensus.
For simplistic sake, and to avoid confusion, let’s take a closer look at Bitcoin.
Bitcoin Blockchain
A blockchain network is a distributed ledger. It stands out because it’s decentralized, transparent, and immutable. Bitcoin is one example of a public blockchain, where nodes partake to keep it organized and verify the transactions.
Every node uses an algorithm, known as proof of work, to reach a consensus. For bitcoin, this is a competition between nodes to solve a puzzle. Once a node claims to have found a solution, the rest process the information to confirm its legitimacy.
This is blockchain consensus in a nutshell.
How Blockchain Consensus Can Change
Understanding how nodes and proof of work algorithms keep Bitcoin’s blockchain verified and legitimate is easy enough. However, other coins might have different algorithms, types of PoW, and ways to verify the blockchain.
Some experience evolutions over time, or are completely replaced. Ethereum, the second-largest cryptocurrency, is a perfect example. It’s also decentralized, but uses smart contracts along with proof of work to maintain its ecosystem.
Its methods to maintain blockchain consensus are currently causing problems, though. The results are slow transaction speeds, issues with scalability, and a limit on transactions per second.
The solution, in this case at least, is to pick up at the next fork. So, people need to anticipate and adjust for ethereum 2.0, also known as Serenity. The changes include more transactions per second, a reduced gas cost, a new proof of stake consensus mechanism, and less congestion on the network.
Consensus is Everything
A decentralized system of any kind requires all parties involved to reach a consensus. Just as people’s trust in the dollar determine its value, so do they require all nodes to reach the same conclusion regarding blockchain technology.
Beyond determining value, though, blockchain consensus keeps the system safe and secure for users. Small-scale or individual attempts to trick or scam a chain are nigh impossible. All other types of manipulation are disregarded, as well, because if all nodes agree then it’s just a consensus.
If you’ve learned something new about how a blockchain works, make sure to take a peek at other articles on the site. There’s plenty more info just a few clicks away.
