Consensus means agreement. Consensus in blockchain is the mechanism by which the network reaches agreement on new transactions. Consensus is the validation of blocks of transactions. It is the way in which a network is made secure.

Blockchain technology is a tool for achieving consensus. It is a decentralized consensus, because the agreement is not being coordinated by a centralized entity. It allows nodes in the network to collectively agree on updates to the state of the distributed ledger.

Bitcoin and Ethereum use a proof-of-work consensus algorithm for keeping track of who owns coins. This is the process of mining on these public blockchains. This concept was introduced by Hal Finney in 2005 as reusable proofs of work. This system uses Adam Back’s computationally difficult Hashcash puzzles to create a method for maintaining a cryptocurrency. In proof of work, the weight of a node in the voting process is proportional to the computing power that the node brings.

A growing alternative is the proof-of-stake consensus algorithm. Staking is a process of depositing cryptocurrency and validating blocks of transactions. In proof of stake, the weight of a node is proportional to its currency holdings rather than computing power.

Cryptocurrency can be supported by either proof of work or proof of stake.

Ethereum has moved to a proof-of-stake consensus following the “merge” in September 2022. Proof of stake for Ethereum has replaced mining with staking.