A consensus mechanism is a vital component of allowing cryptocurrencies to function on a decentralized basis. It describes the protocols and incentives that allow different nodes to come to an agreement about the state of the blockchain.

In simpler terms, a consensus mechanism allows the various different computer systems that make up the cryptocurrency mechanism to agree upon in a single, decentralized ledger containing the transaction history and current balance for everyone on the network.

The two most common consensus mechanisms are:

* Proof-Of-Work (POW): Authority over the blockchain must be earned by performing computationally expensive "work" on the existing blockchain. "Miners" are rewarded for doing the work and establishing consensus. A potential attacker would have to control enough computational power to compete with all the miners on the network. This is a very well-established and reliable consensus mechanism, but it drawn criticism due to the massive quantities of electricity and computer hardware that must be consumed to perform the work.

* Proof-Of-Stake (POS): Authority over the blockchain is granted to those who hold a certain quantity of the currency, known as "validators." Validators, therefore, are rewarded for holding the currency and contributing to the consensus, much like interest at a bank. An attacker would have to control a critical mass of the currency, and by compromising the network they would be devaluing the currency they hold. This mechanism is newer and less common than POW consensus, and uses less energy and computational resources than POW.
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