Proof of stake (PoS) is a consensus mechanism used in some blockchains as an alternative to proof of work (PoW). In PoS, the security and validation of transactions rely on validators who have a vested interest in the network’s health. Here’s how it works:
- Staking: Validators lock up, or “stake,” a certain amount of cryptocurrency holdings. This stake serves as collateral, ensuring validators act honestly.
- Selection Process: Validators are chosen based on their stake size or a combination of factors like stake size and uptime. The more coins staked, the higher the chance of being selected.
- Block Validation: Selected validators take turns proposing and validating new blocks of transactions. Other validators verify the proposed blocks to ensure they’re accurate and follow the protocol rules.
- Rewards and Penalties: Validators who propose and validate valid blocks earn cryptocurrency rewards. On the other hand, validators who act maliciously or go offline can lose some of their stake as a penalty.
PoS secures the network by economically disincentivizing malicious behavior. Tampering with the blockchain would require a validator to risk a significant amount of their staked cryptocurrency, making it a very unattractive proposition.
Proof of Stake vs. Proof of Work: Compared to Proof of Work (PoW) which relies on miners competing with computational power, Proof of Stake (PoS) uses validators selected based on their staked holdings.
« Back to Glossary Index