Proof of Stake is a cryptocurrency consensus mechanism for processing transactions and creating new blocks in a blockchain. The consensus mechanism is a method of validating entries in a distributed database and securing the database. In the case of cryptocurrencies, the database is called the blockchain, so the consensus mechanism protects the blockchain.
Learn more about Proof-of-stake and how it differs from Proof-of-work. Plus, learn about the problems Proof of Stake is trying to solve in the crypto industry.

With proof of stake (POS), cryptocurrency holders validate block transactions based on the number of coins set by validators.

Proof of Stake (POS) was created to replace Proof of Work (POW), the original consensus mechanism used to validate a blockchain and add new blocks.

While PoW mechanisms require miners to solve cryptographic puzzles, PoS mechanisms require validators to simply hold and stake tokens.

Proof of Stake (POS) is considered less risky in terms of the possibility of a network attack because it structures compensation in a way that makes an attack less favorable.

The next block writer on the blockchain is chosen at random, with higher ratings awarded to nodes with higher staking positions.

Learn about Proof of Stake (PoS)

Proof of Stake reduces the amount of computational work required to verify unique blocks and transactions maintaining the blockchain, and thus, a secure cryptocurrency-currency. Proof of Stake changes the way blocks are verified using the server that owns the coin. The owners provide their parts to guarantee the ability to validate blocks. Coin owners with staked coins become “validators”.

Validators are then randomly selected to mine or confirm the block. This system randomizes “my” visitors instead of using a concurrency-based mechanism like proof of work.

To become a validator, a coin holder must “stake” a specific number of coins. For example, Ethereum will require a deposit of 32 ETH before a user can become a validator.

Blocks are validated by more than one validator, and when some specific validator verifies that the block is correct, it is finalized and closed.
Different proof-of-stake mechanisms may use different methods to validate blocks – when Ethereum moves to PoS, it will use shards to send transactions. Validators verify transactions and add them to a shard block, which requires at least 128 validators to attest.

After the shards are validated and the block is generated, two-thirds of validators must agree that the transaction is valid and then the block will be closed.

To summarize the Ethereum PoS process, you could say that it is a shared validation on the crypto network instead of a validation contest.

How is Proof of Stake different from Proof of Work?

Both consensus mechanisms help the blockchain to synchronize data, validate information, and process transactions. Each method has been proven to be successful in maintaining a blockchain, although each has its pros and cons. However, the two algorithms have very different approaches

According to PoS, block creators are called validators. Validators verify transactions, verify activity, vote on results, and maintain records. In PoW, creators are called miners. Miners solve complex mathematical problems to verify transactions; exchange.

To “buy” a position to be a block creator, investors only need to buy a limited amount of the required amount or tokens to become a validator for a PoS blockchain. For PoW, miners have to invest in processing equipment and take on heavy energy loads to power the machines trying to solve the calculations.

Equipment and energy costs in PoW mechanisms are high, limiting access to mining and increasing the security of the blockchain. However, PoS blockchains often allow for greater scalability due to their energy efficiency.