What is Proof-Of-Stake ?

  • Proof of stake (PoS) is an approach used in the cryptocurrency industry to help validate transactions.

  • With proof of stake, participants referred to as “validators” lock up set amounts of cryptocurrency or crypto tokens—their stake, as it were—in a smart contract on the blockchain. In exchange, they get a chance to validate new transactions and earn a reward. But if they improperly validate bad or fraudulent data, they may lose some or all of their stake as a penalty.

  • Proof-Of-Stake consensus algorithm is based on randomly selecting a validator to verify the block and add that onto the blockchain. In order to guarantee validators does not perform false blocks, an amount is paid by the validator as stake.

  • If the validator misbehaves, this stake is diluted and this event is called slashing.

  • When the validator successfully verifies the block, they are rewarded with the native token of the blockchain they are running a node on.

Cryptocurrencies Using Proof of Stake

Networks using proof of stake are easy to find among the cryptocurrency landscape. Here’s a list of several popular platforms using a proof of stake validation method:

  • Cardano

  • Avalache

  • Ethereum

  • Algorand

  • Nxt

  • Cosmos

  • ThorChain

  • Polkadot

Pros and Cons of Proof of Stake


Fast transaction times: Compared to competitive proof of work currencies, proof of stake offers fast transaction times and supports higher transaction volumes.

Security risk: With fewer computers in control of the network, there are added security risks. Notably, if someone controls 51% or more of a cryptocurrency, they get effective control over the entire network.

Low network fees: Proof of stake currencies typically charge very low fees due to the efficient network validation method.

Users need to run three pieces of software to participate in Ethereum's proof-of-stake.

Energy efficient: Fewer computers and less competition mean proof of stake coins require relatively little energy to maintain.

Proof-of-stake is more complex to implement than proof-of-work

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