What is Proof of Stake?

Proof of stake is a method through which new transactions on a blockchain platform are processed, and new blocks of data are formed. This is called a consensus mechanism, and it helps keep the blockchain immune from hacking attempts by automating the transaction processing process, and distributing the data across different nodes. In a nutshell, Proof of stake is a consensus mechanism which helps keep the blockchain safe and secure.

Proof of stake is different from proof of work, which is an alternative used by cryptocurrency like Bitcoin.

Key Points About Proof of Stake

Here are some of the most notable things about the Proof-of-Stake mechanism.

  • The node which has to write the next block of data is picked randomly. Usually, nodes with larger stakes are more likely to be picked as validators.
  • Proof of work is a power hungry mechanism which requires lots of computing power to solve puzzles. On the other hand, proof of stake just requires the nodes to stake their tokens.
  • Validators are randomly picked in the PoS mechanism to keep everything decentralized and transparent.
  • It is a better and more advanced alternative to PoW.
  • Hacking attempts on PoS nodes aren’t as rewarding as on PoW. So, it is more secure than Proof of work.

Understanding PoS

Due to its unique framework, proof of stake requires its nodes to use less computational power as compared to Proof of work. That is because the notes are just required to verify the blocks of data. As a cryptocurrency investor, you are required to stake your crypto and use it as a collateral to get a chance for block validation. The decentralized system selects validators randomly, and assigns them to validate transactions in return for rewards. Larger staking pools have a better chance at getting more blocks to validate, and hence earn better rewards.