Top Cryptocurrencies and How Their Consensus Mechanisms Work
The crypto space is not left out as technology effortlessly implodes every aspect of human endeavor across the globe. Recently, we have seen numerous rapid changes affecting the skies of cryptocurrencies. As times shift, so also do the approaches change, to meet up with the growing concerns. The consensus mechanism continually adapts to keep pace with recent developments.
As an inquisitive crypto enthusiast like me, maybe you have stopped for a while to ask why different cryptocurrencies use different consensus mechanisms. (We will answer that, don’t worry)
However, at this point, I can hear the voices of some new Crypto recruits, or as I like to call them, “new Joes”, screaming at the top of their voices, What in the world is a consensus mechanism? I’ve got you covered. Let’s quickly do justice to that. Let us take a definition of the consensus mechanism.
What is a Consensus Mechanism?
A consensus mechanism refers to the specially crafted protocol of operation that crypto blockchain networks developed to use in verifying the authenticity of transactions carried out on the blockchain. Miners on various networks use the consensus mechanism to agree on the quickest and most efficient way to validate the thousands of transactions happening in the blockchain.
Of course, they earn rewards for validating transactions and keeping the blockchain network stable. The main reason blockchain networks came up with the consensus mechanism is to foster the decentralized practice held and sustained over the years. Blockchains are decentralized, with no central governing authority, hence, there is a need to set up a method by which agreement can be reached amongst the miners.
Popular Types of Consensus Mechanisms
The most popular types of consensus mechanisms include:
- Proof of Work (PoW)
- Proof of Stake (PoS)
- Delegated Proof of Stake (DPoS)
- Proof of Authority (PoA)
- Other Hybrid models
Top 10 Cryptocurrencies and Their Consensus Mechanisms
1. Bitcoin (BTC)
Bitcoin uses a Proof of Work (PoW) Consensus Mechanism.
Bitcoin’s algorithm is built around the SHA-256 mining algorithm, but the PoW consensus mechanism allows miners to “work” out their rewards by validating transactions and submitting proofs on the blockchain for other miners to “prove”. The PoW for Bitcoin‘s SHA-256 is energy-intensive.
2. Ethereum (ETH)
Next on our list is Ethereum, which has a Proof of Stake (PoS) consensus mechanism, ever since the network’s Merge in 2022.
In Ethereum, the Proof of Stake works by allowing miners to stake ETH, and the highest staker is given the right to validate the next transaction. Ethereum made the transition from PoW to PoS to improve energy efficiency.
3. Dogecoin (DOGE)
Dogecoin uses the Proof of Work (PoW) consensus mechanism, similar to that used by Bitcoin. However, both coins function differently as a result of their mining algorithms.
Miners get to work out their rewards and show the entire blockchain the proof behind the validation of the transaction.
4. Binance Coin (BNB)
Binance uses the Proof of Staked Authority (PoSA) consensus mechanism.
You must know that PoSA is a merge of Proof of Authority (PoA) and Proof of Stake (PoS), which results in PoSA. It is mainly used on BNB Smart Chain, which offers fast and low-cost transaction fees.
5. Cardano (ADA)
Cardano uses the Ouroboros Proof of Stake Consensus Mechanism. Please don’t get this twisted, this is a unique type of PoS protocol. Its cool feature is that it divides time into slots, and aims for security and energy efficiency.
6. Solana (SOL)
Solana uses a combo of two consensus mechanisms: the Proof of History (PoH) and the Proof of Stake (PoS).
The PoH consensus mechanism runs as a time-fixed model, working alongside the PoS to achieve high throughput.
7. Ripple (XRP)
Ripple has its special consensus mechanism, which is the Ripple Protocol Consensus Algorithm (RPCA). RPCA is a federated consensus model that doesn’t make use of mining but is known for speedy transactions at a low cost.
8. Litecoin (LTC)
Litecoin uses a Proof of Work consensus mechanism, just like that of Dogecoin (i.e., Scrypt algorithm). This is because they are both kindred coins.
The entire Proof of Work system is similar to that operated by Bitcoin, only that the Scrypt algorithm it operates is less energy-intensive and by far allows for faster block generation.
9. Polkadot (DOT)
Polkadot uses a Nominated Proof of Stake (NPoS) consensus mechanism. This is a derivative of PoS. It involves nominators supporting validators with their stake, thereby helping Polkadot keep the network secure.
10. Algorand (ALGO)
Algorand makes use of the Pure Proof of Stake (PPoS) consensus mechanism.
In this consensus mechanism, validators are selected at random with a weighted lottery system that offers decentralization.
Cheap Remote Crypto Mining for you – Click Here
Conclusion
As a crypto investor, developer, or just a fascinated enthusiast, the knowledge of how a blockchain reaches its consensus is essential to unlock the entirety of the blockchain.