Understanding Consensus
Consensus is a vital concept in both centralized and decentralized systems. In centralized systems, decisions are made by a single center of authority, such as a business’s accounting department. They are responsible for managing and updating the entries in the centralized accounting ledger, which records economic transactions.
On the other hand, decentralized systems consist of multiple independent actors who have equal levels of authority. In these systems, decisions are made collectively, without any central authority.
One example of a decentralized system is blockchain, which is a distributed ledger of transactions. In blockchain, individual miners update the ledger without any central authority overseeing the entries. This makes achieving consensus on the network’s precise state crucial.
However, achieving consensus among numerous nodes in a remote cooperation scenario is a complex task. This complexity is further amplified by the possibility of nodes malfunctioning or intentionally acting against the network’s interests, as demonstrated by the Byzantine Generals’ Problem.
To maintain network consensus on the exact transactions and their timing, cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) utilize technical solutions such as the proof-of-work and proof-of-stake algorithms. These solutions eliminate the need for central enforcement of rules.
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