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Proof Of Stake (PoS)

What is Proof Of Stake?

Proof-of-stake is a cryptocurrency consensus mechanism for processing transactions and creating new blocks in a blockchain. A consensus mechanism is a method for validating entries into a distributed database and keeping the database secure. In the case of cryptocurrency, the database is called a blockchain—so the consensus mechanism secures the blockchain.

Proof-of-stake comes with a number of improvements to the proof-of-work system:

  • Better energy efficiency – you don't need to use lots of energy mining blocks lower barriers to entry
  • reduced hardware requirements – you don't need elite hardware to stand a chance of creating new blocks
  • stronger immunity to centralization – proof-of-stake should lead to more nodes in the network

Proof-of-stake reduces the amount of computational work needed to verify blocks and transactions that keep the blockchain, and thus a cryptocurrency, secure. Proof-of-stake changes the way blocks are verified using the machines of coin owners. The owners offer their coins as collateral for the chance to validate blocks. Coin owners with staked coins become 'validators'.

Proof Of Stake & Security

The threat of a 51% attack still exists in proof-of-stake, but it's even more risky for the attackers. To do so, you'd need to control 51% of the staked ETH. Not only is this a lot of money, but it would probably cause ETH's value to drop. There's very little incentive to destroy the value of a currency you have a majority stake in. There are stronger incentives to keep the network secure and healthy. Stake slashings, ejections, and other penalties, coordinated by the beacon chain, will exist to prevent other acts of bad behavior. Validators will also be responsible for flagging these incidents.

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