Proof of Stake (PoS)

Consensus mechanism where validators are chosen based on the number of tokens they hold and “bet”.

What is it? - Dummies

Proof of Stake, or PoS, is one way that blockchains decide who is right. Instead of using powerful computers like in Bitcoin, here people They “bet” their cryptocurrencies to help validate blocks. The more they have bet, The more weight your votes have. If they behave well, they earn rewards; if they cheat, they may lose some of their money.

What is it? - PRO

Proof of Stake (PoS) It's a distributed consensus mechanism used in blockchains to validate blocks and secure the network, where the right to participate as validator is assigned based on the amount of locked tokens (“stake”) for each node. Unlike Proof of Work (PoW), which requires large amounts of computational power and energy, PoS is based on economic incentives and digital signature cryptography to achieve consensus among network participants.

In PoS, validators are selected pseudorandomily, weighted by the amount of cryptocurrencies they are staking. This process includes penalties such as Slashing for misbehavior (e.g. double validation or inactivity) and rewards in the form of newly issued tokens or transaction fees. This allows the network to be kept secure without the need for hardware-intensive block mining.

PoS has multiple variants implemented in networks such as:

  • Ethereum (after The Merge): Pure PoS with slashing and selection using the RANDAO algorithm.
  • Polkadot/Cosmos: NPoS (Nominated PoS) or DPoS (Delegated PoS) model, where users can delegate their stake to validators.
  • Cardano/Tezos: they use adaptive PoS with integrated governance.

In addition to improving the energy efficiency and scalability, PoS allows for more inclusive and sustainable network designs, opening the door to on-chain governance mechanisms, greater economic decentralization and reduction of entry barriers for block validation.

Key points

  • Alternative consensus protocol to Proof of Work
  • Select validators based on the stake locked in the network
  • Reduces energy consumption and the need for expensive hardware
  • It allows you to receive rewards and penalizes bad practices (slashing)
  • Adopted by Ethereum and many other modern blockchains
  • Advantages

  • High energy efficiency compared to PoW
  • Encourage good behavior through economic penalties
  • Allows participation by delegation (no need to run a node)
  • More accessible for average users who want to contribute to the network
  • Facilitates on-chain governance and scalability structures
  • Disadvantages

  • Risk of economic centralization If few actors accumulate a large part of the stake
  • Economic Incentives Unit to maintain security
  • Technical complexity in the implementation of slashing and random selection
  • Doesn't completely eliminate the risk of coordinated attacks (e.g. 51%)
  • It requires an active and secure infrastructure to operate as a validator
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