What is blockchain consensus?

TL;DR – Blockchain consensus is simply a method used to compare data sheets or records of events happening on a blockchain,all nodes record the same information of events that took place, but also agree, prove, and verify in computer language, events that took place.

Let’s create a silly hypothetical story. You’re in third grade in elementary school. You have 19 classmates. Your teacher tells everyone in the classroom to take out a sheet of paper and write down the color of the teacher’s shirt: red. Everyone in the classroom, except for an intentionally bad student, writes the word “red.” The bad student, instead, writes “blue.” There is consensus that the teacher is wearing a red shirt. Also, all of the kids “wrote it down on a sheet of paper”. All twenty of these sheets of paper are records. One of them is not a good record or accurate record. But the other nineteen are good and accurate records. The children who created the accurate record all got a green check mark on their paper, and got an “A” and a piece of candy – a reward. Remember this example because we will come back to it later.

Blockchain consensus? What does this mean in the context of bitcoin?

Contrary to popular belief, it is not Bitcoin mining, but instead Bitcoin full nodes that keep the bitcoin blockchain secure and effectively create consensus. Bitcoin miners create a record of transactions. But by now you might be wondering, “Is it possible to make a transaction take place that never actually happened?”

Let’s return to our hypothetical classroom full of 3rd graders. If 11 or more students all wrote down on a sheet of paper that the teacher’s shirt is blue, then it becomes a consensus. It becomes read and recorded as a fact instead of a mere opinion. It rewrites history. This level of consensus becomes undeniable to every student in the classroom even though the teacher knows that her own shirt is red. Even if the teacher is still wearing a red shirt, then the entire classroom full of children looks at the teacher and unanimously agrees that the teacher’s shirt is blue when it is not. Because more than half of the students agree (even though it is false) that the shirt is blue, they convince the other 9 students that the shirt is blue. Their eyes even see a blue shirt.Their teacher is powerless to say otherwise or acknowledge otherwise. The entire classroom suddenly became brainwashed into thinking that the red shirt is blue and their minds can’t be changed until -very importantly- ten minutes later. Other teachers come into the class and verify that her shirt is red. All of the other hundreds of students see her red shirt and agree it is red. All of this happens ten minutes later. Those hundreds of students write down that the teacher’s shirt is red and they get the reward of an “A” and a piece of candy. Facts are restored in everyone’s eyes appropriately.

To draw an analogy in the above example, the teachers are acting as full nodes. They are acting as good doers that verify all the work that’s been done. The students who write down blue or red on a sheet of paper are equal to miners in the Bitcoin Blockchain. In a very vague, very general sense, this mirrors what blockchain consensus is all about. But how does it work for Bitcoin?

When Bitcoin mining devices are committing hash power to the blockchain, they are essentially all working in tandem to record transactions that are taking place live on the bitcoin blockchain. They are sending logs via a shell to what can be thought of as a text file, and this text file is the ledger, the bitcoin blockchain. Anyone who owns a mining device and has it set to mine and send information that is incorrect, containing transactions that never took place, can be thought of as the bad student in the classroom example above. All of the miners that are contributing honest, factually correct information to the blockchain can be thought of as the good students in the example above. Good students are rewarded just as good bitcoin miners are rewarded.

All of this is to say that blockchain consensus is simply finding a way for individual nodes, individual devices, running protocol-specific software, to agree that an event is taking place and should be recorded permanently to the blockchain.

What makes blockchain consensus different from conventional finance & computing?

Please note that this section is not meant to make you think that your bank is superior or inferior to Bitcoin. Prior to the existence of ATMs, if you wanted to know your bank balance, you needed to go to the bank and keep an immaculate record of every transaction that you made using a checkbook or keeping in mind the difference in cash in your physical wallet and the last reported amount of cash in your bank account from the bank teller employee. Only the properly authorized staff at the bank knew the exact balance of your money and could tell you. Fast forward to the era of online banking, mobile banking, etc. When you log into your bank account through an application or a website and it tells you your balance, you are viewing information that the bank’s central server has access to, as well as you have access to, and any other properly authorized staff in between can also see this information. There is no room for consensus. You read information that is relayed to you from a central server.

Conversely, when you see the amount of bitcoin that you have in your Bitcoin wallet, not only do you know that you have it, but every other participant in the Bitcoin ecosystem could theoretically see the balance in your Bitcoin wallet if they knew your wallet address and were inclined to view the balance of it whenever they wish. It is through the blockchain’s consensus that you have that bitcoin in your bitcoin wallet. This isn’t just restricted to Bitcoin. This is restricted to the protocol. And thus, that is what gives us the main difference between conventional finance and computing and blockchain consensus.

Does that make Bitcoin automatically superior to conventional systems?

There is an important distinction between saying which system is more reliable and which system is best for your own use cases. If you’re an American earning a six-figure salary every year and you don’t have any debts to worry about, then you probably don’t need Bitcoin unless you are worried about long term inflation. If anyone wants exposure to Bitcoin, then one percent of their portfolio is more than enough exposure. If you have $100 saved at the end of each month, then $1 on Bitcoin is more than enough. There are systems that you can use and register, too, that will let you buy Bitcoin for just a dollar. Strike and Cash App both come to mind.

One last detail needs mentioning: While it is technically possible to change transaction records on the Bitcoin blockchain, such a feat is near impossible. The amount of money, the amount of finances, and the amount of hardware to make it happen would defeat the purpose. Search or do research on “the likelihood of a 51% attack.” That doesn’t mean, however, that the creator of Bitcoin did not have a legitimate fear of this issue in the very beginning. These are topics for another day, however. But the other side of the coin (no pun intended) is that there are countries with unreliable banking systems, and for these countries, Bitcoin and cryptocurrencies (especially stablecoins) have been a godsend for them.

In conclusion: pick what is best for you.

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