Consensus algorithms like Proof of Work and Proof of Stake validate transactions on the blockchain from "summary" of Blockchain Technology Explained by Alan T. Norman
Consensus algorithms play a crucial role in validating transactions on the blockchain. These algorithms ensure that all transactions on the network are legitimate and that there is agreement among all participants on the state of the ledger. One of the most well-known consensus algorithms is Proof of Work, which is used by popular cryptocurrencies such as Bitcoin. In a Proof of Work system, miners compete to solve complex mathematical puzzles in order to validate transactions and add them to the blockchain. The first miner to solve the puzzle gets to add the next block of transactions to the chain and receives a reward in the form of new coins. This process not only validates transactions but also secures the network against potential attacks. Another consensus algorithm is Proof of Stake, which works differently from Proof of Work. In a Proof of Stake system, validators are chosen to create new blocks based on the number of coins they hold. The more coins a validator has, the more likely they are to be chosen to validate transactions. This system is seen as more energy-efficient than Proof of Work, as it does not require miners to solve complex puzzles. Both Proof of Work and Proof of Stake have their advantages and disadvantages. Proof of Work is known for its security and reliability, as it has been battle-tested by cryptocurrencies like Bitcoin. However, it is also criticized for its high energy consumption and potential for centralization. On the other hand, Proof of Stake is seen as a more sustainable alternative, but it is still a relatively new concept and has not been widely adopted yet.- Consensus algorithms are a fundamental part of blockchain technology. They ensure that all participants in the network agree on the validity of transactions and help maintain the integrity of the ledger. By understanding how consensus algorithms work, we can appreciate the underlying mechanisms that make blockchain technology possible.
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