Navigating Proof of Stake (POS)

Shivi Sharma

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Proof of Stake (POS): An Overview

Proof of Stake (POS) is a consensus algorithm that has emerged as a more energy-efficient alternative to Proof of Work (PoW). POS is used in many popular cryptocurrencies, including Ethereum, as a means of verifying transactions and adding them to the blockchain. In this blog, we will explore how POS works, its advantages and disadvantages, and why it is gaining popularity in the cryptocurrency world.

How Proof of Stake Works

In a Proof of Stake system, instead of using computational power to verify transactions, a node is chosen at random to validate a transaction and add it to the blockchain. The node is selected based on the amount of cryptocurrency it holds and the length of time it has been holding it. This is known as "staking," and the node is referred to as a "validator." The more cryptocurrency a node holds and the longer it has been holding it, the higher the chances of it being selected as a validator. The validator is then responsible for verifying transactions and adding them to the blockchain. If the validator confirms a fraudulent transaction, it is penalized and its stake is reduced, which serves as an incentive for it to act honestly. On the other hand, if the validator acts honestly, it is rewarded with a portion of the transaction fees.

There is a leader schedule as well, that anyone can see, for the next time slot. So each leader knows his/her chance in advance.

ADVANTAGES	DISADVANTAGES
Can help increase the value of the native coin	A new blockchain, usually starts with pow, because it hasn’t grown to a level that people wud stake money in advance in order to participate in the mining process
Very less energy consumption - better for environment	Increase in the rich-poor gap
You don’t need powerful hardwares, even modern smartphones can do the mining, cuz the difficulty level is very low.	Possibility of a 51% attack, if the miners come together - low possibility but the risk is still there
You can use delegated POS, which means u can buy the native coins, and then vote for someone else who has a validator node ready, to do the mini for you - meaning - there is no need of a special equipment or knowledge	Involves luck - which can be a plus/negative. In POS, the network chooses one validator to validate a block, and the others can either vote to accept or deny his validation, if everyone denies, means that the validator has faked a transaction - his native currency will be slashed (taken away) as a punishment. Also, the chance of your becoming a validator increases with the amount of token you are staking, and for how long have you been staking.

Proof of Stake

Conclusion:

Proof of Stake is a consensus algorithm that provides a more energy-efficient and scalable alternative to Proof of Work. It enables a decentralized system for verifying transactions and adding them to the blockchain. Despite its disadvantages, it is gaining popularity in the cryptocurrency world and is likely to play a significant role in the future of digital currency. As the cryptocurrency community continues to evolve, the consensus algorithms used will also continue to change and evolve to meet the demands of the network.