🔷 How Are Transactions Verified?

🏗️ Introduction

In traditional finance, banks verify transactions. But in blockchain, there is no central authority—transactions are validated by consensus mechanisms.

🔹 Consensus mechanisms ensure that all network participants agree on transactions without a central party.
🔹 Different blockchains use different consensus models, each with unique advantages.

Let’s explore the most commonly used consensus mechanisms:

1️⃣ Proof of Work (PoW) – Used by Bitcoin
2️⃣ Proof of Stake (PoS) – Used by Ethereum 2.0
3️⃣ Proof of History (PoH) – Used by Solana

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🔗 What is a Consensus Mechanism?

A consensus mechanism is a process that allows blockchain nodes to agree on transactions in a trustless environment.

✅ Key Functions:
✔ Verify transactions without a central authority.
✔ Prevent double-spending attacks.
✔ Keep the network secure and decentralized.

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🔥 Proof of Work (PoW) – Bitcoin’s Mining System

🔹 How It Works:

• Miners solve complex mathematical puzzles.
• The first miner to solve the puzzle adds a new block.
• This process is called mining and rewards the miner with new coins.

💡 Example:

• Bitcoin miners compete to solve cryptographic puzzles to add new blocks.
• The network ensures only one valid block is added at a time.

🟢 Advantages:
✔ Highly secure – Requires massive computational power to attack.
✔ Decentralized – Anyone can participate.

🔴 Disadvantages:
✖ Energy-intensive – Requires huge amounts of electricity.
✖ Slow transaction times – Bitcoin processes only ~7 transactions per second.

📌 Used by: Bitcoin, Litecoin, Dogecoin

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⚡ Proof of Stake (PoS) – Energy-Efficient Validation

🔹 How It Works:

• Validators are chosen based on the amount of cryptocurrency they stake.
• Instead of mining, participants lock up tokens as collateral to validate transactions.
• Validators earn rewards for confirming transactions honestly.

💡 Example:

• SiriuX uses PoS to reduce energy consumption while maintaining security.
• The more coins you stake, the higher your chance to validate transactions.

🟢 Advantages:
✔ Energy-efficient – Uses 99% less energy than PoW.
✔ Faster transactions – More scalable for DeFi and NFTs.

🔴 Disadvantages:
✖ Wealth concentration – Those with more coins have more influence.
✖ Newer and less battle-tested than PoW.

📌 Used by: Ethereum 2.0, SiriuX, Cardano, Polkadot

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⏳ Proof of History (PoH) – Solana’s Unique Approach

🔹 How It Works:

• PoH creates a verifiable historical record of transactions.
• Transactions are timestamped before being validated.
• This allows the network to process thousands of transactions in parallel instead of waiting for consensus.

💡 Example:

• Instead of nodes waiting for transaction verification, PoH pre-orders transactions with cryptographic timestamps.
• This eliminates delays and boosts transaction speeds dramatically.

🟢 Advantages:
✔ Ultra-fast transactions – Handles ~65,000 transactions per second (TPS).
✔ Low fees – Costs just fractions of a cent per transaction.

🔴 Disadvantages:
✖ Less decentralized than PoW/PoS – Requires a leader node to order transactions.
✖ Requires high-performance hardware – More demanding for validators.

📌 Used by: Solana

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🆚 Comparison Table: PoW vs. PoS vs. PoH

✅ PoW is best for security but is slow and energy-intensive.
✅ PoS is faster and more efficient but favors users with large stakes.
✅ PoH is ultra-fast and ideal for large-scale dApps but requires high-performance hardware.

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🔍 Other Consensus Mechanisms

🔹 Delegated Proof of Stake (DPoS) – Users vote for delegates who validate transactions (Used by EOS, TRON).
🔹 Proof of Authority (PoA) – Transactions verified by approved nodes (Used by private blockchains).
🔹 Proof of Burn (PoB) – Validators destroy tokens to prove commitment.

Each blockchain chooses a model based on speed, security, and decentralization needs.

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🎯 How Does Blockchain Stay Trustless?

🔹 Consensus mechanisms replace banks & intermediaries in validating transactions.
🔹 PoW (Bitcoin) ensures maximum security but is slow & energy-intensive.
🔹 PoS (Ethereum 2.0) provides speed & efficiency, making it ideal for DeFi & NFTs.
🔹 PoH (Solana) enables ultra-fast transactions but sacrifices some decentralization.

💡 Choosing the right consensus mechanism depends on security, decentralization, and scalability needs.

🚀 Next Lesson: What is Cryptocurrency and How Does It Relate to Blockchain?