A blockchain consensus mechanism in addition to Proof-of-Work that maintains the integrity of blockchain.
PoS is another consensus mechanism, the method by which blockchain confirms transactions and prevents the problem of double counting.
Double counting occurs when the same coin or token is used for more than one transaction.
While Proof-of-Work is used for Bitcoin transactions, PoS was created to work as a powerful alternative.
Many researchers believe PoS is significantly more energy efficient compared to PoW and more secure, although some critics question the integrity of these claims.
It is relatively quite easy to spot double counting in a centralized environment, such as a bank overseeing fiat money.
But double counting under cryptocurrencies, which rely on decentralized systems, would be very hard to prevent if it were not for PoW or PoS.
Industry participants often point out that Bitcoin uses the amount of energy as Switzerland — highlighting the level of strain cryptocurrencies put on electricity systems.
Proof-of-Stake involves miners validating additional blocks if they have greater amounts of money locked up in the system.
To illustrate an example, a miner who owns 10% of coins of Bitcoin will only be able to mine 10% of the blocks.
Sometimes energy costs are so high under PoW that miners need to sell coins in order to pay their energy bills.
PoS’ structure means the mechanism can be less vulnerable to cyberattacks as its structure acts as a disincentive for a miner to attack the system due to the structural way the system ranks compensation.
It's 2021, and it's time to stake — but what exactly is staking, and how can you stake in the crypto markets?