ELI5 Summary of cryptocurrency consensus mechanisms

ELI5 Summary of cryptocurrency consensus mechanisms

There are currently two mainstream consensus mechanisms which are used by most cryptocurrencies: proof of work (PoW) and proof of stake (PoS). But these aren’t the only ones! In fact, there are many other consensus mechanisms out there.

Cryptocurrency technology is a very rich field for research and development, both in the industrial and academic circles. Development is so fast in this field, it’s difficult to keep up!

So, if you really want to dig into the technical world of cryptocurrencies, then there are several additional kinds of trust-less and decentralized agreement mechanisms that you should know about. 

Here we present a short summary of several systems and the projects with which they are affiliated.

This article is meant as an introduction to the topic and definitely not as a comprehensive guide. If you find this topic interesting, then we suggest you check out the references presented at the end of the article.

Game Theory

All consensus mechanisms work based on the same game theoretic idea: it must be more expensive to defraud the system than the potential rewards obtained via the legal block rewards system (mining, staking and so forth).

How, exactly, this is achieved is what differentiates each type of consensus mechanism.

In all cases, participants must present some proof of value.

Whether it’s proof of high energy consumption or of ownership of a stash of coins – participants must offer the P2P network a proof of their capacity to generate valid blocks.

To use current terminology, miners and stakeholders must be able to prove they have skin in the game. Fraud attempts must always cost a higher price than the potential reward.

Below you’ll find a link to each consensus mechanism. Of course, first item in the list is the original Bitcoin consensus mechanism: Proof of Work. Also known as Nakamoto consensus – followed by the most popular consensus systems in use today.

* Notes: Both Proof of Activity and Proof of Authority use the PoA acronym. Context must be provided whenever there’s ambiguity. Proof of Space and Proof of Capacity both exchange computing time for storage capacity.


Here we covered not only the two mainstream consensus mechanisms but other more exotic ones as well.

We keep this article updated by including new mechanisms when we find them.

The commercial and academic communities are working nonstop on developing more secure and energy-efficient consensus mechanisms. This is currently one of the most exciting areas of research in computer science.


Different Blockchain Consensus Mechanisms

Crypto Research: Consensus Mechanisms

Blockchain Consensus: A Simple Explanation Anyone Can Understand

A History of Blockchain Consensus Mechanisms

A Survey on Consensus Mechanisms and Mining Strategy Management in Blockchain Networks [PDF]

Bitcoin consensus mechanisms explained: Byzantine fault-tolerance

HedgeTrade: What is a Consensus Mechanism?

What Is a Blockchain Consensus Algorithm?

Comparative evaluation of consensus mechanisms in cryptocurrencies