Technical Concepts

Consensus

Consensus Mechanism

Method for blockchain networks to agree on transaction validity

Definition

A consensus mechanism is the method by which a blockchain network agrees on the validity of transactions and the state of the ledger. Common types include Proof of Work and Proof of Stake.

Example

Bitcoin uses Proof of Work consensus while Ethereum transitioned to Proof of Stake for better energy efficiency.

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What to check

Treat it as infrastructure: understand what it automates, what trust assumptions remain, and how failures propagate. The main checks are: 51% attacks; Centralization; Security assumptions.

Risks to Consider

  • 51% attacks
  • Centralization
  • Security assumptions

Common Questions

Why did Ethereum switch from Proof of Work to Proof of Stake?

For better energy efficiency, improved security, and to enable features like sharding for better scalability.

What does Consensus mean in DeFi?

Consensus means Method for blockchain networks to agree on transaction validity. The useful question is not only the definition, but how the mechanism changes risk, return, liquidity, or governance for the user.

How is Consensus used in practice?

A practical example: Bitcoin uses Proof of Work consensus while Ethereum transitioned to Proof of Stake for better energy efficiency.

Related Terms

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