In the blockchain network, there are no centralized bookkeeping institutions such as banks to ensure the consistency of every transaction. Reaching consensus is of utmost importance. The consensus mechanism addresses this issue.
Currently, the main consensus mechanisms are Proof of Work and Proof of Stake. Proof of Work measures the work generated to determine the probability of receiving a reward, the larger the work output, the higher chance of getting the block reward.
Proof of Stake determines your mining power by looking at the amount of coins you hold and for how long. This is similar to the dividend system used in stocks. The more shares held, the higher the dividends received. The principle behind Delegated Proof of Stake (DPOS), is similar to that of PoS, except that it uses “elected delegates”.
In DPOS, stakeholders elect representatives, who carries out verification and updating of records to the ledger. With the advancement of technology, we may soon see the emergence of new consensus mechanisms.