What is Proof of Stake ?
Table of Contents:
- Introduction
- Fun Facts!
- What is Proof of Stake?
- How Does Proof of Stake Work?
- What Coins Use Proof of Stake?
- What is Better Proof of Stake or Proof of Work?
- Other Consensus Mechanisms
- Final Words
As a decentralised network, blockchain technology necessitates a dependable way for reaching consensus. The disparate databases have come to a consensus on a single data value. Consensus mechanisms are a type of methodology that helps determine security and trust.
Various cryptocurrencies, on the other hand, have selected different approaches, with Proof-of-Stake consensus being one among them. You’re probably wondering what Proof of Stake is all about right now.
That’s exactly what you’re going to find out.
Let’s get started!
Fun Facts!
- Dogecoin has decided to switch to Proof of Stake with Vitalik Buterin, the founder of Ethereum as an Advisor.
- Ethereum (ETH) has the most profitable proof of stake cryptocurrency. The network has decided to merge with Ethereum 2.0 to solve scalability problems caused by about 3000 dApps on the system.
- Some critics have called Bitcoin an environmental disaster because it consumes much more electricity than three countries put together.
- One of the reasons China banned Bitcoin mining is the massive energy consumption because the cryptocurrency used Proof of Work.
What is Proof of Stake?
Proof of Stake is a consensus mechanism that ensures the security of the database when entries are validated into it. The blockchain is less vulnerable to attacks because to this consensus system. The network’s validators store their bitcoin on the blockchain as collateral. They use the number of coins to validate the following block transactions. Before a block can be finalised, a certain number of randomly chosen validators must certify that it is real and accurate.
The Proof of Stake mechanism centres on the “staking” system, in which participants must stake a particular quantity of cryptocurrency. They place their currencies on the block that they want to add to the chain, depending on the limits set by different blockchains.Validators also vote on the legitimacy of transactions and are compensated in cryptocurrency if the procedure is successful.
The staking method is an efficient way for Proof of Stake to reduce validator computational input. It also speeds up the validation process. Instead of Proof of Work, which requires complex hardware, this consensus process only requires a private computer.
This consensus algorithm is a low-energy system that cuts the time it takes to construct a valid block in half.
How does Proof of Stake Work?
The Proof of Stake system is a distributed consensus mechanism that seeks to solve the shortcomings of the Proof of Work mechanism. It offers fewer possibilities for an attack on the blockchain network. Also, this mechanism is used to reduce the computational work usually
required for the verification of transactions. As a result, this verification process upholds security on the blockchain.
Furthermore, Proof of Stake as a mechanism has a design that encourages scalability and even environmental sustainability. It offers people opportunities to get advantages, especially in the monetary aspect. Validators of the transactions are picked randomly, and when the process is successful, they earn rewards for proposing new blocks and for the validation process.
What Coins Use Proof of Stake?
The first coin to use PoS is Peercoin. Afterward, other popular coins began to use PoS systems, including:
- Cardano (ADA)
- Cosmos (ATOM)
- VeChain (VET)
- Polkadot (DOT)
- Tezos (XTZ)
- Avalanche (AVAX)
- Solana (SOL)
What is Better Proof of Stake or Proof of Work?
Although both Proof of Work and Proof of Stake are consensus mechanisms, they differ in a number of ways.
To validate entries into the blockchain, Proof of Stake requires less computational power and hardware. To begin, you must first comprehend the differences between the two methods.
Proof of Work: Pros and Cons
Bitcoin is a popular example of a cryptocurrency that uses Proof of Work. As a result, this consensus mechanism has proven to be a safe means. Also, validators are rewarded with Bitcoin to prevent double-spending and attacks on the system. This system requires hardware and electricity to process transactions, which is a major disadvantage. They are usually expensive for users who cannot afford the costs. This system requires miners to solve puzzles before completing a block of transactions. The downside is that multiple machines are needed to solve the puzzles.
Proof of Stake: Pros and Cons
PoS also aims to develop a safe system for transaction verification. Proof of Work miners must devote their entire life to obtaining hardware resources, particularly huge computers.
PoS, on the other hand, allows consumers to concentrate on the cryptocurrency itself. Because of its low-cost solutions, Proof of Stake is becoming more popular in the blockchain world.
The disadvantage of this approach is that it can lead to centralised control. With no restriction on how much a validator can stake, cryptocurrencies are more prone to centralization. Another concern is that it is not regarded as secure enough for bitcoin transactions due to its inexperience.
Proof of Stake Vs. Proof of Work
PoW is considered to be safer than PoS. However, Proof of Work is slower in its function. Also, PoS requires participants to drop cryptocurrency as a stake before successfully approving their transactions. This is a downside to using PoS. The staked cryptocurrency keeps the network secure and cannot be withdrawn while staking. However, it is not a requirement with Proof of Work.
Furthermore, PoS systems require less energy since it has nothing to contribute to the earned block reward. Also, it creates more opportunities to participate in the node, which fosters a high level of decentralization. In addition, Proof of Stake makes resistance against 51% attacks. Also,
it uses the “slashing” system to penalize validators for entering bad transactions into the system, which allows nodes to participate well.
Other Consensus Mechanisms
- Delegated proof of stake (DPOS): This system is a democratic protocol where a group ofdelegates is chosen to validate transactions. Transactions are validated with more incredible speed than PoS, which facilitates high scalability. EOS and Lisk are popular projects that use this mechanism.
- Pure proof of stake (PPOS): It doesn’t require that users put aside a fraction of their stake before participating actively in the protocol. Algorand is the first cryptocurrency to use
this mechanism.
Conclusion
Most Proof-of-Stake blockchains aren’t as old as Bitcoin (BTC). However, the advantages of this consensus technique cannot be overlooked, as it makes the validation process easier, faster, and less expensive to engage in. Although Proof of Stake has not been around as long as Proof of Work, it has proven to be effective.
