Crypto FAQ: What is a blockchain "consensus algorithm"?

• Defn: consensus algorithm
  [compound noun: noun "consensus" (agreement) + noun "algorithm" (sequence of instructions)]
  In the context of Computer Science, a consensus algorithm is a mechanism that proves distributed entities agree upon the correctness of one or more data values. In the context of cryptocurrency, a consensus algorithm is a procedure through which all the peers of the Blockchain network reach a common agreement about the current state of the distributed ledger.
  

Common cryptocurrency consensus algorithms include, but are not limited to:

Proof-of-Work (PoW): if someone has proof that they can produce large amounts of computational power to solve mathematical work (i.e. they can mine for cryptocurrency), they are able to participate in a blockchain. The amount of weight a participant has in the blockchain is proportional to the amount of computational power they have. Although it is more costly and considerably less energy-efficient, it is also therefore harder to control more than half of the blockchain than in a PoS consesus algorithm;

Proof-of-Stake (PoS): if someone has coins that they can give as a deposit (or as a "stake" in the blockchain), they can become a participant. The amount of weight these "actors" have in the blockchain is proportional to the amount of stake they have in it—that is, how many coins they have deposited. Although PoS is more energy-efficient and less costly than PoW, it is also arguably less secure (such as, for example, in the event of a 51% attack).