Blockchain relies on consensus algorithms to reach an agreement among nodes (a computer connected to the network). In simple terms a blockchain is a decentralized database that is managed by distributed computers on a peer-to-peer (P2P) network. Each computer keeps a copy of the ledger to prevent a single point of failure (SPOF). Updates and authentications are reflected in all copies concurrently.
For example, Bitcoin runs a proof of work (PoW) consensus algorithm to guarantee security in a trustless network, by using mechanisms that ensure that the effort of mining is represented within the block submitted by the miner. Software on the networked computers of miners accesses the computers’ processing power to solve transaction-related algorithms. The block is an encrypted hash (a function that converts one value to another) “proof of work” that is created in a computer-power-intensive process.
Other commonly used consensus algorithms include the proof-of-stake consensus algorithm (PoS) and the delegated proof-of-stake consensus algorithm (DPoS).