The Proof of Stake, Proof of Stake (PoS) is currently the second most widely used consensus mechanism in Blockchain technology. Its algorithm is in charge of choosing the verifier of the next block based on various mechanisms generally related to your bet. With Proof of Stake (PoS), the probability of finding a block of transactions and obtaining the corresponding reward is directly proportional to the number of coins that are deposited, and not by the amount of work invested in mining.
The concept of Proof of Stake Proof of Stake (PoS ), assumes the type of block chain generation, where the mathematical computing power of the participants is not required. You only need to store crypto assets in your account. So instead of using a large amount of electricity, participants have a limited percentage of possible transaction verifications. It stands to reason that the more coins a miner has, the stronger their options will be.
What is POS or Proof of Stake?
The Proof of Stake (PoS), called Proof of Stake is one of the two governance models used in Blockchain. And it has been created as a consensus protocol capable of replacing its peer, the well-known proof-of-work (PoW), which has been used successfully for a long time by the main cryptocurrencies, such as Bitcoin and Ethereum. And unlike PoS, Proof of Stake (PoS) doesn’t require a lot of power.
However, both methods coincide in their end. Achieve a distributed consensus, that is, help the network to secure a chain of blocks and in this way, provide the appropriate economic incentives to promote the honest validation of transactions. In the Proof of Stake system, the creator of the next block is determined by a random system. This system is based on the number of cryptocurrencies a user has and in some cases, also takes into account how long they have had those coins.
Also, Proof of Stake (PoS) is considered less risky in terms of the possibility of miners attacking the network. This occurs because the offsets are structured in such a way that an attack would backfire on the miner himself. The Proof of Stake (PoS) protocol was created by Sunny King, a renowned developer in 2011. Already in 2012, King officially presented his White Paper, where he highlighted the operation of the PoS algorithm. The first cryptocurrency to implement it was Peercoin in 2012.
How Does Proof Of Stake Or POS Work?
Proof of Stake (PoS) is a mechanism that determines which node approves adding a new block to the blockchain based on the number of assets held. It is not a calculation that proves that the content of a block is free of errors or fraudulent. Proof of Stake requires the user to prove possession of a certain amount of cryptocurrency(their stake) in order to claim to validate additional blocks on the blockchain and receive the reward.
The selected validator will receive their reward as a network transaction fee, depending on the amount of their participation. However, being a random system avoids centralization; otherwise, the richest individual would always create the next block by constantly increasing their wealth and control. Additionally, PoS can reduce power consumption, which is one of the drawbacks of PoW. Since your system doesn’t need expensive computer equipment, you need the money to maintain the network.
In Proof of Stake, cryptocurrency miners can mine or validate block transactions based on the number of coins each one has. Also, Proof of Stake requires less block generation time than Proof of Work. For example, with Bitcoin using PoW, you must wait at least 10 minutes for each send, but with PoS, the transaction is completed in seconds. By moving to PoS, the time required to exchange cryptocurrencies will be significantly reduced.
What Protocol Does It Replace?
The Proof of Stake, Proof-of-Stake (PoS), was created as an alternative to Proof-of-Work (PoW ), to address the different problems related to the latter. Proof of Stake (PoS) comes to replace Proof of Work (PoW) consensus, which the blockchain is running on. Initially, it was developed to find PoW vulnerabilities and optimize its work. But then it became an independent mechanism that gained popularity among developers in the world of cryptocurrencies.
Because of this, with each passing day the number of Proof-of-Stake-based cryptocurrencies is increasing. And its main difference from proof of work is that the miners that generate computing power are no longer needed to keep the network running, only the cryptocurrencies themselves are needed. Thanks to Proof of Stake, the health of the blockchain is ensured by digital currency holders and they receive rewards for it. This process is called staking.
Proof-of-stake consensus also differs from proof-of-work in that there is no need for any computing power. While in the proof of work the possibility of receiving a reward for confirming transactions and creating a new block is higher for the one who has more powerful equipment in the system, in the proof of participation, the priority to confirm transactions and find a new block is given to the one with the most coins.
What Are The Advantages Of Using POS?
The main advantage of Proof of Stake is that it reduces the huge electrical power expense used by Proof-of-Work (PoW) to secure a blockchain. But this, although perhaps the most notorious, is not the only one of its advantages. Also counting as an advantage is the fact that, thanks to the savings in electricity consumption, there is no real need to issue new cryptocurrencies to motivate participants to contribute to the network.
Another important advantage is the reduced risk of centralization, thanks to the fact that proof of participation allows the use of game theory algorithms and its random system. As well as, the reward granted is always proportional to the amount of coins contributed in custody. PoS, Proof of Stake systems can effectively counter centralization. Furthermore, in Proof-of-Stake, the “custodians” of the coins are always their holders (although some cryptocurrencies allow or provide staking power to other nodes).
In proof of stake the amount of the reward is determined by its own specific mechanism, the cryptocurrency and other factors. Also, it is not formed from the generated coins, as in the proof-of-work algorithm. It is made up of the aggregate commissions with which the participants paid for the services of validation of their transactions. Another advantage worth mentioning is the speed in the formation of each block, which is done in seconds, unlike PoW.