Mining

Solving a complex cryptographic puzzle. Uses cryptographic algorithms. A fundamental property of cryptographic algorithms is that they should be extremely hard to reverse engineer to find the input, but extremely easy to verify the output. Introducing changes to the actual blocks of data would require more than 50% of processing power that the whole network has. This is the major security advantage of block-chain. The miners are rewarded with Bitcoin for participating in creating the consensus.

Consensus

When you interact with multiple parties, you need some sort of consensus mechanism to ensure everyone has got the right records. The consensus is the backbone of the Blockchain and any other decentralized and distributed technology.

Proof of work
•  Uses mining to try out millions computations per second to determine if the Blockchain can be updated or not
•  Bitcoin uses this mechanism

Proof of stake
•  The more a miner has, the more they can get, and the more they can decide
•  This disadvantages other miners in the network

Proof of work
•  Uses mining to try out millions computations per second to determine if the Blockchain can be updated or not
•  Bitcoin uses this mechanism

Closed consensus
•  Doesn’t require mining
•  Growing in popularity in some banking and insurance segments
•  Certain nodes are required to put up a security deposit in order to participate in updating the Blockchain

These transactions are then validated by arbitrators

Smart Contracts

Blockchains are decentralized. So, no need to pay mediatories for a contract Smart contracts helps you exchange money, property, shares or anything Provides a transparent, conflict-free way without using services of a middleman
•  Defines rules and penalties around an agreement in a same way that a traditional contract does
•  Also, automatically enforces those obligations

smart_contracts
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