What is a Consensus Mechanism in blockchains?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Today, let's talk about consensus mechanisms in blockchains and why they are one of the most important concepts to understand.

But first, let's quickly revisit how blockchains memorize transactions.

Imagine blockchains are like your family history. Many members of your family have a copy of your family tree, but when you compare notes at your reunion, suddenly your uncle has a strange version where a few names are very different.

So: If there are two or more copies of something, and they are not all exactly the same, who decides which one is the right one?

That's where those consensus mechanisms come in. Consus here means agreeing how to validate information. Your family could decide: Any version of your family tree that has the most identical copies is the correct one. Or you can say: We designate a person we always trust to maintain our family history, because we know they are great at that stuff.

Blockchains are the same, but deal with financial transaction history. Much like your family tree is in multiple peoples' hands, the blockchain is copied onto multiple computers, sometimes even thousands.

Without a well-designed consensus mechanism anyone could just make up new information and assign their wallet money they never had. These rules are designed to make that as hard as possible. And quite successfully actually - Bitcoin and Ethereum have never been tricked into accepting fake information.

And about that uncle - turns out he was just pranking everyone. Good that you had a working consensus mechanism in place!

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.