Proof of stake
IntermediateAug 10, 2022
Proof of stake is a method of achieving distributed consensus through the selection of a validator set. It is used by blockchains to reach consensus on transactions in the network. Proof of Stake (PoS) is an alternative to the energy-intensive process of mining in proof-of-work (PoW). Proof of work requires that a node spends significant computational power to solve complex mathematical problems. The result is that only a limited number of nodes can mine for new blocks, which makes mining unprofitable for most people and organizations. Proof-of-Stake works by having all the validators or nodes in a blockchain put up a stake (deposit) from their cryptocurrency holdings, which will be lost if they act fraudulently or maliciously within the system. This ensures that no one can sign multiple blocks at once and it also gives them an incentive to stay honest as they will have their coins locked up for some time if they are caught cheating.
More about POSA cryptocurrency blockchain network that uses Proof of Stake (PoS) seeks to achieve distributed consensus. In PoS-based cryptocurrencies, the next block's creator is chosen using a variety of arrangements of chance, wealth, or age (i.e., the stake). In contrast, the algorithm of proof-of-work-based systems chooses the creator of the next block based on computing power, i.e., processing speed. In proof of work systems, miners compete with each other to solve complex mathematical problems in order to create new blocks and add them to the blockchain. The process requires substantial hardware and energy consumption and it is impossible to predict when a miner will find the solution and add a block to the blockchain. In proof of stake systems, there are no miners which mean that there are no blocks. Instead, all users who hold some amount of tokens can take part in consensus formation by signing transactions on Ethereum’s blockchain network or creating new blocks on Cardano’s Ouroboros protocol. Proof of stake was first introduced by Peercoin back in 2012 but at that time it was not adopted by other cryptocurrencies due to its low transaction speed and high transaction costs. The networks that use Proof of Stake or a form of it include:
- BNB Chain
- BNB Smart Chain
AdvantagesThere are several advantages to proof of stake:
- It’s more efficient because it doesn’t require as much electricity as proof of work. This makes it more environmentally friendly.
- It’s more secure because there are fewer people who need to be paid off for selfish mining attacks to succeed.
- It provides an incentive for users to hold coins rather than sell them immediately after receiving them from airdrops or other distributions.
- No need for specialized hardware
- Transactions are faster than PoW cryptocurrencies