What Does Proof-of-Stake (PoS) Mean in Crypto?
It is a type of consensus algorithm used in a number of crypto projects. By using it, those with a larger stake in the network have a bigger chance of earning rewards. It is widely-used nowadays. One of the examples is Redot – a decentralized, open-source cryptocurrency exchange with an innovative PoS mechanism.
What Is Proof-of-Stake (PoS)?
It is an algorithm allowing validation of transactions and earning rewards depending on the amount of coins users hold. Proof of Stake Coins are a type of cryptocurrency that uses a PoS in validating transactions and generating new blocks.
How Proof-of-Stake (PoS) Works?
PoS is one of the most popular consensus mechanisms in the cryptocurrency space. It allows users to stake in order to securely validate transactions with the help of validators that are selected randomly.
What Is the Difference Between Proof-of-Stake and Proof-of-Work?
In proof-of-work algorithms reward participants who were to solve complex math problems in order to verify transactions and create new blocks. PoS works a bit differently. The creator of the next block is chosen in a deterministic way. Those who have more coins automatically have more chances to validate blocks and earn rewards.
Comparison Table
| Proof of Stake | Proof of Work |
| Validators simply need to hold a certain amount of the network’s currency | Requires expensive hardware and computational resources in order to validate blocks |
| The probability of validating is proportional to the amount of currency that a validator holds | The probability of validating is proportional to the share of computational power that a miner controls |
| Considered to be more efficient, as it requires less energy and resources | Considered to be more secure |
Proof-of-Stake (PoS) Advantages and Disadvantages
Advantages:
- Low resource requirements: Expensive mining hardware is not needed.
- No risk of centralization: Since anyone can stake coins, there is no barrier to entry and a risk of centralization.
Disadvantages:
- Potentially lower security: Since the choice of block creator is deterministic (based on wealth or age), it may be easier to attack the network than in PoW.
- Requires trust: In order for PoS to work, users must trust that the block creator will not abuse their power. This is not an issue with proof-of-work, as the work required to create a block provides a strong disincentive to attacking the network.
List of Proof-of-Stake coins
The following are the most well-known PoS coins:
- Bitcoin (BTC)
- Bitcoin Cash (BTH)
- Ethereum (Eth 2.0)
- Litecoin (LTC)
- Dogecoin (DOGE)
- Peercoin (PPC)
- Cardano (ADA)
- Tron (TRX)
- EOS (EOS)
- Cosmos (ATOM)
- Tezos (XTC)
That’s not the full Proof-of-Stake Coins List.
Key Takeaways
There are a few key takeaways when we speak about proof-of-stake. First, PoS is an alternative to PoW, which is one of the most common consensus algorithms used in crypto. Second, proof-of-stake is more energy efficient than proof-of-work and is therefore considered more environmentally friendly. Finally, PoS can be used to create more secure and decentralized networks than those created with PoW.
FAQ
Does Proof-of-Stake Have Less Impact on the Environment?
Yes, proof-of-stake has less impact on the environment than proof-of-work. With proof-of-work, miners compete against each other to solve complex math problems in order to earn rewards. This consumes a lot of energy, which can be bad for the environment.
Is Proof-of-Stake (PoS) secure?
Yes, PoS is a secure method of verifying transactions on a blockchain. Unlike PoW, which requires miners to solve math tasks in order to add new blocks to the chain, PoS allows miners to stake coins and then verify transactions.
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