What is Proof of Stake?

Proof of stake (POS) is the algorithm, which prevents a network (Blockchain) from possible attacks like DDOS or spam actions. First of all, It is necessary to realize that the Proof of Stake is based on the Proof of Work (POW) concept. So, you really need to understand, what is Proof of Work and how it works. After that, you start exploring Proof of Stake. POS was first described at 2009 on Bitcoin talk post. This idea wanted to solve the main shortcomings of Proof of Work and adds some other new interesting features.

Why Proof of Stake

In every blockchain network, there must be set up some system, how to secure block verification and all network. The first solution, how to secure blockchain network found Proof of work system, which is based on verification thru miners (miners verify every transaction) and Decentralized consensus (No one can control entire network).

But the main negative factor of Proof of Work is an amount of consumed electricity. You can look at the actual comparison of consumed electricity from bitcoin mining against to states. Worldwide payment network can’t consume electricity like some nationality. That would be a big environmental problem for the future. The answer to this problem is Proof of Stake, which has no electricity consumption and few more advantages against Proof of work.

proof of stake, crypviz, cryptocurrency, bitcoin, ethereum, POS

How Proof of Stake works?

In Proof of Work, miners are rewarded by solving cryptographic puzzles (CPP) thru their computing power in order to validate transactions. On the other hand Proof of Stake works, that verification of transactions is based on the stake of currency holders. These people are called “Validators”. Basically, If validator put “stake” into POS system, the block is verified thru their stake. Verifying block thru stakes are called not mining but “forging”. For example, If you own 0,5% of all currency and put it into the stake, your stake will validate 0,5% blocks in the network. Also, POS system allows, that users can vote about the important decision in the network according to the amount of owned currency.

This is very simple explanation and description of Proof of Stake concept. If you want continue, I recommend Wikipedia or Ethereum FAQ about POS.