Proof of Stake [PoS]

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Proof of Stake or PoS is defined as a process for achieving consensus and building on a digital record known as a blockchain. With PoS, users put up a collateral of tokens (or a “stake”) and use a process that is more energy and cost-efficient than previous solutions.

Imagine the blockchain as a digital book of records. Every page in that book can only store X amount of information. So we create new pages to store more information. Those pages are blocks in the blockchain. The process of creating new blocks, recording and verifying information is all a part of mining.

With Proof of Stake, users can participate after depositing and risking a certain amount of their crypto. This is known as a “stake”. Users cannot spend or move their stake. If they are caught recording false information or doing something against the rules, they risk forfeiting their entire stake. People who provide a stake are known as “validators”.

Validators are willing to endure the cost and risks of staking for the chance to earn transaction fees paid by users of the system. Validators earn these fees whenever they are selected to record and verify information.

Validators are selected at random but can increase their chances and their reward size by staking a larger amount.

Proof of Stake systems are used for cryptocurrencies that have all of their coins released in the beginning unlike in Proof of Work systems, where new coins are regularly created and rewarded.

See “Proof of Work” for more information.

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