Chapter 7: Consensus Mechanisms and Related Issues

Consensus mechanisms are fundamental to public decentralized blockchain ledgers such as bitcoin. Bitcoin's underlying technology ‒ blockchain ‒ is a cryptographically secured methodology where transactions generated by anonymous participants are continuously and publicly being recorded (de Vries 2019). Without consensus mechanisms, the key features of the bitcoin blockchain ‒ tamper resistance, double-spending prevention, and provenance ‒ would not exist.

Consensus means arriving at a general agreement or unanimity. Consensus mechanisms in blockchains are features to consolidate the preferences and decisions of users and to manage decision-making of the network (Van Rijmenan and Ryan 2019). Consensus algorithms allow the public (permissionless) blockchain to operate without a third-party authority. In totally private (permissioned) blockchains, where participants are known to one another and granted access by the owner and governance is private, consensus is basically by authority or majority-rule. Private blockchains, where an owner allows outsiders to participate, might require some degree of consensus, depending on the application. A good illustration would be a blockchain hosted or owned by a large retailer such as Walmart where each external vendor is invited to participate in a smart contract to provide transparency to Walmart's food supply chain (Hyperledger 2019).