HomeKNOWLEDGECryptoWhat is Proof of stake? Efficient solutions for...

What is Proof of stake [PoS]? Efficient solutions for energy and security

Proof of stakeI had a post about in the previous post What is Proof of Work (PoW)? If you don't know it, you can watch it again. Today I will introduce to you the Proof of stake consensus mechanism. The system still uses the encryption algorithm. But the goal of the mechanism compared to PoW is different. No more lengthy, just develop.

What is Proof of Stake?

Proof of Stake (PoS) is a consensus algorithm for the blockchain network. Decide who validates the next block. Instead of deciphering cryptographic problems use computing power to verify transactions.

Proof of Stake was introduced in 2011. Peercoin is the first cryptocurrency to implement a comprehensive PoS consensus model. More scalable PoW consensus in Bitcoin, requiring significant energy expenditure.

Proof of Stake (POS) was created as an alternative to Proof of Work (POW). Used to confirm transactions and add new blocks to the chain.

See more: What is Blockchain?

How Proof of stake works

Proof-of-Stake achieves consensus by requiring users to contribute an amount of their tokens for a chance to be selected to validate blocks of transactions and be rewarded for doing so.


In PoS, blocks are “forged” instead of mined. The first factor considered in this selection process is the user's stake.

Each person who wants to participate in the process must own a share in the network. Staking involves locking a certain amount of money into the network as their stake. Use it as collateral to prove the block.

The more users bet, the higher their chances of being selected. The number of stakes determines the chance that a node is selected as a validator to forge the next block. The bigger the stake, the bigger the chance against the less staking.

In PoS, the incentive to participate in validating reward blocks is a payment in the form of transaction fees. As opposed to newly created currency in PoW systems.

To avoid thinking this is an opportunity for rich nodes in the network. More and more unique methods are added to the selection process. The key here is to include a degree of opportunity in the selection process to avoid the situation where the richest user is always selected to validate transactions, always reaping the rewards and getting richer and richer.

The two most commonly used methods are Random block selection , and Coin age selection:

  • Random block selection: Validators are selected by looking for the nodes with the lowest hash value associated with the largest stake.
  • Coin age selection:  Nodes are selected based on how long their tokens have been held as stakes. Coin age is calculated by multiplying the number of days coins are held as stake by the number of coins.

Evaluate the advantages and disadvantages of PoS

PoS is one of the best choice for cryptocurrency consensus algorithm.


  • Energy: PoS algorithm saves energy – especially when compared to PoW.
  • Security: To control the network and approve fraudulent transactions. A node must own a majority stake in the network, also known as a 51% attack. This would be impractical because to gain control of the network. You need to own 51% of the coins in circulation.
  • Hierarchy: If users on a PoS-based network invest twice as much as other users. They will have double control. The same scenario on PoW would grant users exponential control.


  • PoS is based on shares that correspond to holdings. That means big token holders have better ROI and the rich get richer.
  • Large token holders threaten the network's decentralized validation process. Put more power in the hands of rich validators.

Benefits for crypto holders

When you own cryptocurrency you are not interested in being a validator. It is also possible to get rewarded for participating in the network's ecosystem.

Different ways to generate revenue by stking (staking) are available today. The rules depend on the blockchain you are using. Be sure to learn more about each protocol before joining:

  • Reward for holding: Users can earn rewards by only keeping their coins in their wallet for a certain period of time. The action of receiving the reward can be automatically executed by the protocol. Or due to user action.
  • Rewards for participating-authorize: User entrusts part of his stake to validators. The reward will come from the validator sharing a portion of his revenue with those who entrust their shares to him.

Cryptocurrency using PoS

Ethereum, the premium smart contract platform. In the process of transitioning from PoW to PoS to supplement the performance needs of the network. Other networks, like Cosmos. A live blockchain network and one of the first full-blown PoS implementations to go live.

Peercoin (PPC) uses a system that combines both methods. There are also Nxt (NXT), HyperStake,…

The popularity of Proof of Stake

PoS has grown in circulation significantly over the past few years among public blockchains looking to improve their fundamental performance implementation. Bitcoin. Such blockchains can support a variety of transactions, and other applications have emerged to meet specific network needs.

PoS also gives validators and node operators a greater opportunity to participate in consensus. To enter requires holding a specific number of tokens. This is appealing to users who don't want to spend on expensive hardware to mine Bitcoins.

Overall, PoS has gained significant momentum in the rapidly growing crypto space.


The popularity of Proof of stake making it the new standard. Each algorithm will have its own advantages and disadvantages, but currently PoS is more dominant in confirming new blocks. PoS has wide support among many industry experts so sustainability is better. Everyone has their own assessment for each mechanism.

5/5 - (3 votes)
- Advertisement -