Home » All You Need to Know about Proof of stake (PoS) | Alex Reinhardt

All You Need to Know about Proof of stake (PoS) | Alex Reinhardt

by Nathan Zachary
Alex Reinhardt

In 2021, eco-friendly organizations raised an alarm that Bitcoin uses as much electricity as Thailand. Since the invention of Bitcoin, proof-of-work has dominated the peer-to-peer cryptocurrency industry, yet, it necessitates a substantial amount of computer power, which uses a lot of electricity.

Additionally, Alex Reinhardt emphasizes that Proof of Work (PoW) generates a lot of electronic waste from mining equipment that is discarded in favor of ever-more-powerful models. Blockchain developers created a proof of Stake (PoS) to provide a consensus process that uses less energy.

What is Proof of Stake (PoS)?

Proof-of-stake is a consensus algorithm used by cryptocurrencies to process transactions and add new blocks to a blockchain. While PoS techniques require validators to store and stake tokens to earn transaction fees, PoW mechanisms depend on miners to solve cryptographic challenges.

Proof of Stake (PoS) determines who can create the next block. Blockchain users who become validators can lock up their tokens for a set period. Users can create blocks after becoming validators via the blockchain’s architecture.

How Does Proof of Stake (PoS) Work?

Generally, the user with the largest stake or who has owned the longest coins has a better chance of forming a new block. Alex Reinhardt explains that validators typically receive all or a portion of the transaction fees from every transaction made in the block they established as payment for their efforts.

Alternatively, because of inflation, validators might only get a certain number of coins. Unlike other blockchain consensus processes like Proof of Work, Proof of Stake uses less energy.

Benefits of Proof of Stake (PoS) over Proof of Work (PoW)

Proof-of-stake reduces the amount of computational labor required to verify blocks by employing the machines owned by currency holders. Owners stake their currencies in exchange for the opportunity to validate blocks and, after that, become validators.

Under PoS, block makers are referred to as validators. A validator audits transactions, confirms activity, casts ballots for conclusions, and keeps records. Block creators are known as miners in the PoW system, and to verify transactions, miners attempt to find the hash, a cryptographic number. They receive a coin as compensation for deciphering the hash.

You need to possess enough coins or tokens to qualify as a validator on a PoS blockchain to “purchase into” the role of a block maker. For PoW, miners must make significant investments in processing hardware and pay high energy costs to power the machines running the computations.

As stated by Alex Reinhardt, PoW mining requires expensive energy and equipment, which restricts who may mine and increases the blockchain’s security. Blockchains with a PoS model require less computing power to verify blocks and transactions. Additionally, the approach reduces network congestion and eliminates PoW blockchains’ motivation based on rewards.

How Does Proof-of-Stake Handle Security?

Although it is unlikely to happen, the 51% attack, which has long been portrayed as a danger for supporters of cryptocurrencies, is a worry when PoS is used. In PoW, a 51% attack occurs when a single entity has more than 50% of the miners and utilizes that majority to change the blockchain.

However, a person or group must own 51% of the staked cryptocurrency in a PoS system. Since the cost of holding 51% of a cryptocurrency stake is very high, it is less likely to happen.

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