What consensus mechanism is used by Ethereum and Bitcoin?

The foundation of blockchain technology relies on a network of decentralized nodes. In view of the decentralized nature, special protocols must be adopted to ensure that these nodes operate in a coordinated manner and recognize and verify legitimate transaction activities. This basic protocol is the so-called consensus mechanism. Ethereum and Bitcoin are the most important blockchain networks at the moment. Many novices will be curious about the consensus mechanism used by Ethereum and Bitcoin. It is understood that the Ethereum consensus mechanism is proof of equity, while Bitcoin is proof of work. The essence of both is to provide a reliable, synchronized and generally accepted historical perspective of network transactions. The editor below will tell you in detail.

What is the consensus mechanism used by Ethereum and Bitcoin?

Bitcoin uses the Proof of Work (PoW) mechanism, which is the first consensus mechanism of blockchain technology. Ethereum also initially adopted the Proof of Work (PoW) mechanism, but after the Ethereum Merge in September 2022, it switched to the Proof of Stake (PoS) mechanism.

In the field of blockchain technology, reaching consensus plays a vital role in maintaining the integrity and security of decentralized systems. Proof-of-work blockchains require massive amounts of energy, advanced hardware, and massive computing power to introduce a new set of transactions, called a block, to the decentralized ledger.

Here, nodes called miners compete to generate random numbers to unlock subsequent blocks. The first miner to successfully reach this number will be granted the privilege to add the next block to the chain and be rewarded for their computational efforts. The entire process is a testament to their computing prowess, which is highly dependent on powerful hardware and massive power consumption.

Proof-of-stake blockchains work slightly differently. Rather than competing through computing power, nodes in this system (called validators) are required to deposit a designated value of the blockchain’s native token, which serves as their stake. The more tokens a validator stakes, the higher the chance of being selected to propose a new block and receive rewards. However, erring validators may face penalties or even be removed from the verification process.

Nodes play a fundamental role in these consensus mechanisms. They evaluate the data of pending transactions and, after cross-referencing their records, communicate approval or rejection status. For example, if a person attempts to make a transaction with coins that have already been spent, most nodes will reject this transaction according to their immutable ledger, ensuring the reliability and accuracy of the system. Additionally, if any node decides to challenge an established record, a network-wide recall needs to be invoked. Only when more than two-thirds of the nodes agree can a transaction be confirmed, distributed and indelibly recorded on the blockchain.

What is the connection between Ethereum and Bitcoin?

Ethereum and Bitcoin are both network virtual currencies. Bitcoin and Ethereum are both representatives of digital currencies, but their positioning and application scenarios are different. Bitcoin is mainly used for payment and value storage, while Ethereum focuses more on the development of smart contracts and decentralized applications. Although the two compete in some aspects, their success has jointly promoted the development and popularity of blockchain technology.

Bitcoin is a digital currency, and its emergence marks the birth of blockchain technology. Bitcoin uses decentralized blockchain technology to ensure the security and anonymity of transactions. Simply put, Bitcoin is a public ledger that records all transactions. These transaction records are packaged into "blocks" and linked together to form a "chain." This technology makes it extremely difficult to tamper with or forge transactions, thus ensuring the security of transactions.

Ethereum was developed on the basis of Bitcoin. It is a smart contract platform based on blockchain technology. Unlike Bitcoin, Ethereum is not just a digital currency, it is a programmable blockchain. This means that users can create their own smart contracts and applications on Ethereum. These smart contracts can be automatically executed according to preset conditions without the need for centralized third-party management. The emergence of Ethereum has brought greater flexibility to the application of blockchain technology, allowing more companies and developers to use this technology to create various applications.

The above is the detailed content of What consensus mechanism is used by Ethereum and Bitcoin?. For more information, please follow other related articles on the PHP Chinese website!