What is a consensus mechanism?

On a decentralized Blockchain, there has to be a way for the participating computers (nodes) to agree on which transactions are valid, and which are not. A consensus mechanism ensures such agreements are consequent and based on the same principles every time. It is essentially a set of rules that defines the grounds of transaction validation and malicious behavior, determines, and enforces punishments. Two of the most popular mechanisms are Proof of Work, which Bitcoin uses, and Proof of Stake, implemented by numerous altcoins, such as Polkadot.

Proof of Work Explained

Proof of Work is a consensus mechanism that is based on how much computation is behind a validation. In practice, on Bitcoin’s blockchain, nodes have to solve complex mathematical equations with the goal of finding a specific number determined by the consensus mechanism. Whichever computer (node) manages to retrieve this number first can validate a group of transactions, getting some BTC in return—this process is also called Bitcoin mining. Imagine it like this: for each block of transactions, the consensus mechanism creates a lock without a key, and supervises the nodes while they are trying to come up with a way to open it; since this task is not only really hard but requires quite a bit of luck as well, whichever manages first must be the most worthy. Hence its solution becomes trusted.

Proof of Work: Pros and Cons

Proof of Work has proven to be extremely secure; however, it also has some cons next to its many pros. To begin with advantages, its fully tamper-proof nature has to be one of the main ones. During its almost fourteen years, Bitcoin hasn’t registered any malicious behavior, nor lost funds on its blockchain. Also, the mechanism provides anonymity to nodes, ensuring they operate with the highest level of integrity. However, it does have some theoretical threats, such as a 51% attack. In this highly unlikely case, one node would be more powerful alone than 49% of all other nodes combined, resulting in becoming the absolute majority. This would come with the ability to overrule the mechanism, as it would only need to agree with itself, without the other 49% having a chance o beat it in the calculations. Fortunately, as said before, this would require such astronomical computational capabilities that its occurrence is extremely unrealistic.

On another note, since computing requires great amounts of electricity, Proof of Work is often attacked by climate activists who tend to highlight the consumption of Bitcoin as inefficient, and environmentally unfriendly.


While Proof of Work (PoW) has some debatable drawbacks, it’s still considered one of, if not the safest, consensus mechanisms in the crypto world. Its exact operation can sound complicated and intimidating at first sight. Still, all that everyday traders and investors need to know is that PoW has maintained a flawless track record since 2008, and we can safely assume that it is here to stay.