Proof of Stake
PoS is an alternative to PoW for processing transactions and creating new blocks. While PoW requires miners to solve cryptographic puzzles, PoS requires validators that lock their cryptocurrencies as collateral.
Proof-of-Stake (PoS) is a consensus algorithm used in blockchain networks to validate transactions and create new blocks. Unlike Proof-of-Work, where miners must solve complex cryptographical puzzles to validate transactions, PoS selects validators based on their staked cryptocurrencies. Validators are then responsible for generating new blocks and authenticating transactions in the network if they commit their funds to the system by locking their coins.
To participate in PoS, users must first stake a certain amount of cryptocurrency as collateral. The more cryptocurrency users stake, the higher their chances of being chosen as validators.
Blockchains that deploy the PoS model achieve consensus through a process that selects validators based on a combination of factors.
The block selection process varies, but it usually considers the staking size called “coin age,” which means how long coins are being staked. In most cases, the block selection uses a randomization mechanism, meaning validators take turns forging new blocks.
When transactions are processed, validators are rewarded with transactions fees and newly minted cryptocurrency.
However, if a validator is found to be acting maliciously, such as trying to double-spend, they will lose their staked cryptocurrency. This is intended to disincentivize validators from behaving badly and maintain the network's security.
PoS is considered a promising alternative to PoW due to its energy efficiency and the ability to maintain security using little computational power.