Consensus mechanisms lie at the core of the cryptocurrency ecosystem, ensuring that participants in a distributed network agree on a single version of transaction history. This process is crucial for the integrity of decentralized blockchains, where there is no central authority to oversee the database.
Other models, such as delegated proof of stake , proof of authority and proof of history , offer various advantages and trade-offs concerning the blockchain trilemma of security, scalability and decentralization, as well as energy efficiency. The choice of consensus mechanism significantly impacts the overall functioning of a cryptocurrency network, shaping its ability to resist attacks and process transactions effectively.
In contrast, proof of stake and its variants rely on validators who lock up, or stake, a certain amount of cryptocurrency as a form of security deposit. The staked amount influences their likelihood of being chosen to validate new transactions, with higher stakes generally increasing the chances of selection. However, if a validator acts dishonestly, they risk losing their stake, a punitive measure known as slashing.
This is particularly important in scenarios where there's a potential for disagreement, such as when a user attempts to spend the same digital token twice, known as double-spending, or a proposed change in the protocol's rules.