What is a Consensus Algorithm?

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Published on
September 16, 2022

Welcome to the fascinating world of blockchain technology, where consensus algorithms play a pivotal role in ensuring the integrity and security of the decentralized network. For professionals and enthusiasts in the blockchain realm, understanding consensus algorithms is crucial. In general, a consensus algorithm is a process in computer science used to achieve agreement on a single data value among distributed processes or systems. Consensus algorithms are designed to achieve reliability in a network involving multiple unreliable nodes. Solving that issue – known as the consensus problem – is important in distributed computing and multi-agent systems. In this blog post, we'll delve into the intricate world of consensus algorithms, their significance, and how they form the backbone of the blockchain ecosystem.

Defining Consensus Algorithms

In the realm of blockchain, a consensus algorithm is a mechanism utilized to achieve agreement among distributed nodes on a specific state of the network or a set of transactions. Essentially, it helps validate and finalize transactions, ensuring that the information recorded on the blockchain is accurate and immutable.

The Importance of Consensus Algorithms

Consensus algorithms are vital for several reasons:

  1. Security and Immutability: By requiring agreement from a majority of participants, consensus algorithms ensure that the data stored on the blockchain is secure and tamper-resistant.
  2. Decentralization: Consensus mechanisms enable decentralization by preventing a single entity from controlling the network, promoting a trustless environment.
  3. Fault Tolerance: In the presence of faulty or malicious nodes, consensus algorithms maintain the integrity of the system by allowing the network to reach a common agreement.

Types of Consensus Algorithms

1. Proof of Work (PoW)

PoW is one of the earliest and most well-known consensus algorithms. In this mechanism, participants, known as miners, compete to solve complex mathematical problems to validate and add a new block to the blockchain. The first one to solve the problem is rewarded with new coins. PoW is resource-intensive, requiring significant computational power.

2. Proof of Stake (PoS)

In PoS, validators are chosen to create new blocks based on the number of coins they hold and are willing to "stake" as collateral. The higher the stake, the higher the chances of being chosen. PoS is energy-efficient compared to PoW and encourages coin holders to maintain the security and stability of the network.

3. Delegated Proof of Stake (DPoS)

DPoS is a variation of PoS where coin holders vote for a limited number of delegates who are responsible for validating transactions and creating blocks. It combines decentralization with efficiency, as the voting process allows coin holders to choose representatives.

4. Proof of Authority (PoA)

In PoA, block validators are identified and authenticated by a central authority or a consortium. This consensus algorithm is highly efficient and suitable for private and consortium blockchains, where trust among participants is established.

5. Proof of Burn (PoB)

PoB involves participants "burning" or destroying existing coins, proving their commitment to the network. The more coins burned, the greater the probability of being chosen to create a new block. This mechanism aligns incentives by linking network participation to coin destruction.

6. Practical Byzantine Fault Tolerance (PBFT)

PBFT is a consensus algorithm suitable for permissioned blockchains. It focuses on reaching consensus in a distributed system even if some nodes are faulty or malicious. It requires at least two-thirds of the nodes to agree on the order of transactions.

7. HoneyBadgerBFT

This is a Byzantine fault-tolerant consensus algorithm that ensures secure and consistent ordering of transactions, even in the presence of malicious nodes. It's resilient to various attack vectors and ensures asynchronous and decentralized agreement among participants.

Consensus in Hyperledger Fabric

The consensus in the Hyperledger Fabric network is a process where the nodes in the network provide a guaranteed ordering of the transaction and validate those blocks of transactions that need to be committed to the ledger.

Consensus must ensure the following in the network:

  • Confirms the correctness of all transactions in a proposed block, according to endorsement and consensus policies.
  • Agrees on order and correctness and hence on results of an execution (implies agreement on the global state).
  • Interfaces and depends on a smart-contract layer to verify the correctness of an ordered set of transactions in a block.

Consensus Properties

Consensus must satisfy two properties to guarantee agreement among nodes: safety and liveness.

  • Safety means that each node is guaranteed the same sequence of inputs and results in the same output on each node. When the nodes receive an identical series of transactions, the same state changes will occur on each node. The algorithm must behave identically to a single node system that executes each transaction atomically one at a time.
  • Liveness means that each non-faulty node will eventually receive every submitted transaction, assuming that communication does not fail.

The Voting-Based Consensus

There are two main types of Consensus: Voting based and Lottery based.

Hyperledger makes use of the permissioned voting-based consensus. The operating assumption for Hyperledger developers is that business blockchain networks will operate in an environment of partial trust. Thus, the voting-based algorithms are advantageous in that they provide low-latency finality. When a majority of nodes validate a transaction or block, consensus exists and finality occurs. Because voting-based algorithms typically require nodes to transfer messages to each of the other nodes on the network, the more nodes that exist on the network, the more time it takes to reach a consensus. This results in a trade-off between scalability and speed.

Consensus in Hyperledger Fabric is broken out into 3 phases: Endorsement, Ordering, and Validation.

  • Endorsement is driven by policy (m out of n signatures) upon which participants endorse a transaction.
  • The ordering phase will get the endorsed transaction and agrees to the order to be committed to the ledger.
  • Validation takes a block of ordered transactions and validates the correctness of the result.

Transaction Flow in Hyperledger Fabric: Choosing the Right Ordering Plugin

In Hyperledger Fabric, the transaction flow and the choice of ordering plugin are crucial components that significantly impact the security, scalability, and fault tolerance of the blockchain network. As multiple ordering plugins are being developed, including BFT Smart, Simplified Byzantine Fault Tolerance (SBFT), Honey Badger of BFT, and the default Apache Kafka, selecting the appropriate plugin is essential based on application use cases and the desired fault tolerance model.

Transaction Flow in Hyperledger Fabric

Client Proposal

  The transaction process begins with a client proposing a set of transactions. These transactions can involve asset transfers, smart contract invocations, or any other actions based on the application's requirements.


  The proposed transactions are then sent to endorsing peers, where they are executed against the smart contracts. The endorsing peers provide their endorsement signatures, validating the results of the transaction execution.


  Endorsed transactions are packaged into blocks and sent to the ordering service. The ordering service aggregates transactions from multiple clients into a consistent order, creating blocks of transactions.

Consensus and Block Creation

  The ordering service uses the consensus mechanism (which can be one of the available ordering plugins) to agree on the order of transactions. The agreed-upon transactions are then grouped into blocks.

Block Distribution

  The blocks are disseminated to all the peers in the network for validation.

Validation and Commitment

  Each peer validates the transactions within the block, ensuring they adhere to the network's rules and policies. If validated, the transactions are committed to the ledger, updating the state and completing the transaction process.

Choosing the Right Ordering Plugin

The choice of the ordering plugin should align with the application use cases and the desired fault tolerance model:

1. Apache Kafka (Reference Implementation):

  - Use Cases: Well-suited for most use cases, especially when high throughput and fault tolerance are essential.

  - Fault Tolerance Model: Provides strong fault tolerance capabilities due to its distributed and replicated design.

2. BFT Smart:

  - Use Cases: Ideal for applications requiring strong consistency and high fault tolerance, such as financial systems.

  - Fault Tolerance Model: Employs Byzantine fault tolerance mechanisms to withstand malicious behavior within the network.

3. Simplified Byzantine Fault Tolerance (SBFT):

  - Use Cases: Suitable for scenarios where high throughput and Byzantine fault tolerance are critical, such as enterprise-grade applications.

  - Fault Tolerance Model: Utilizes a simplified version of Byzantine fault tolerance for achieving consensus.

4. Honey Badger BFT:

  - Use Cases: Appropriate for use cases where asynchronous Byzantine fault tolerance is necessary, like sensitive data handling applications.

  - Fault Tolerance Model: Provides a robust Byzantine fault tolerance mechanism, even in asynchronous network conditions.


The choice of the ordering plugin in Hyperledger Fabric profoundly impacts the performance, security, and fault tolerance of the blockchain network. Understanding the transaction flow and aligning it with the appropriate ordering plugin based on application use cases and desired fault tolerance model is critical for building a reliable and efficient blockchain solution. Each plugin has its strengths, and selecting the right one ensures the successful implementation of your blockchain network. Stay informed, experiment, and choose wisely to unlock the true potential of Hyperledger Fabric for your applications. Happy blockchain development!

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