Consensus

Consensus is the mechanism by which nodes agree on both

• historical blockchain
• new additions to the historical blockchain

Consensus is the process by which all nodes agree on the same ledger.

The difficulty of consensus is to trust the result of a transaction or block, without trusting the parties involved.

DeFi is at the early stage of providing consensus. There are a lot of mechanism. Two of them are popular.

• PoW: Bitcoin, ETH 1.0
• PoS: ETH 2.0

Proof-of-Work (PoW)

PoW is a way to solve consensus problem. It's very straightforward.

• The mining node begins to solve an very difficult hashing problem, with the transactions being a part of the input. (It guesses the key of the hashing)

• Once the correct answer is found, the result will broadcast to the rest of the network. (The miners will be rewarded if they find the answer)

PoW is robust. But it wastes a lot of resources to solve the hashing problem.

Proof-of-Stake (PoS)

Instead of all the people solve the hashing problem together, PoS delegates the work to the people who has stakes.

For example, if you have 10% of stakes, you handle the 10% of transaction validation work.

If the validator proves a wrong transaction, he will pay for the loss by reducing his stakes.

It's more efficient than PoW, but it leads to centralization, which makes the rich richer (The people who holds more stakes has more chance to handle the validation, so they have more chance to have the reward).