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Consensus

Consensus means that participants in a blockchain network agree with one another. They agree on which transactions are valid and the order in which they are stored.

Last updated • 2 min read
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What is consensus?

A blockchain is a digital record where transactions are stored in blocks. Many computers, called nodes, maintain and check this record.

Consensus is the process these nodes use to determine together whether a new block is valid. No central party is needed to oversee everything. The rules for this process are set out in a consensus algorithm.

The node that adds a new block is often called a validator. With Proof of Work, this participant is called a miner. They may receive a reward in cryptocurrency for doing this.

A simple example of consensus

Suppose someone sends Bitcoin to another person. The computers on the network, also called nodes, check whether the transaction is valid. For example, they check whether the sender has enough Bitcoin and has not already spent it.

The transaction is then included in a new block. Through the consensus mechanism, the network determines which blocks are valid and added to the blockchain. This ensures that all participants follow the same rules and helps prevent the same Bitcoin from being spent more than once.

Why is consensus important in crypto?

Consensus is important because it allows a blockchain to function without a central administrator, such as a bank. The computers on the network follow the same rules to check transactions and agree on which data is recorded on the blockchain. This helps prevent fraud, such as spending the same crypto twice.

You’ll often read about consensus mechanisms such as Proof of Work and Proof of Stake in crypto news. Bitcoin, for example, uses Proof of Work, while Ethereum uses Proof of Stake. These systems determine how new blocks are added and how the network is secured. Changes to the consensus mechanism can affect a blockchain’s security, speed, and energy use.

Consensus does not mean that all participants vote on every transaction. The network uses technical rules set in advance to determine which transactions and blocks are valid.

Disclaimer: This content is for informational purposes only and does not constitute financial, investment, legal, or tax advice. The information provided may be incomplete, inaccurate, or outdated and should not be relied upon as such. Nothing on this website should be considered a recommendation to buy, sell, or hold any cryptocurrency. Investing in crypto-assets involves risk of loss.