Consensus refers to the collective agreement of the participants on a blockchain network to make decisions or add a block of transactions to previously existing blocks.
Given many cryptocurrencies are built on a decentralized peer-to-peer computer network, it is mandatory that there is a set method of determining and validating transactions. For example, the bitcoin blockchain mandates that the block is passed through a hashing function and validated by more than 50% of all the nodes across the entire network.
This protocol is defined in the original white paper issued by the creator of Bitcoin, Satoshi, which to date eliminates the need for a central authority in maintaining and updating the ledger.
Blockchain Consensus Mechanisms
Consensus mechanisms differ amongst various blockchains. For example, the Bitcoin blockchain uses a Proof-of-Work (PoW) to confirm transactions and mine new coins while the Ethereum blockchain uses a Proof-of-stake (PoS) which randomizes and determines who gets to produce the next block.
Other blockchain consensus mechanisms include the delegated proof-of-stake, Proof-of-capacity (PoC), Proof-of-Authority, Proof of identity, etc.
The bottom line remains that the consensus mechanism of any blockchain project is its fundamental part as it provides a framework and defines a set protocol for which information (transactions in the case of cryptocurrencies) is validated and stored on the blockchain.