GLOSSARY · BLOCKCHAIN & WEB3
Proof of Stake (PoS)
What proof of stake is: validators secure the chain by locking tokens instead of mining, how selection and rewards work, and what slashing punishes.
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What is proof of stake (PoS)?
Proof of Stake (PoS) is a distributed consensus mechanism used in blockchains to validate blocks and secure the network, where the right to participate as a validator is assigned based on the amount of tokens locked (“stake”) by 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 pseudorandomly, weighted by the amount of cryptocurrency 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 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.
Learn more: What Is Blockchain and How Does It Work? Types, Real Examples and Limits
Explained simply
Proof of Stake, or PoS, is one way that blockchains decide who is right. Instead of using powerful computers like in Bitcoin, here people “stake” their cryptocurrencies to help validate blocks. The more they have staked, the more weight their votes carry. If they behave well, they earn rewards; if they cheat, they may lose some of their money.
Proof of Stake: key points
- Alternative consensus protocol to Proof of Work
- Selects validators based on the stake locked in the network
- Reduces energy consumption and the need for expensive hardware
- It allows participants to receive rewards and penalizes bad practices (slashing)
- Adopted by Ethereum and many other modern blockchains
Proof of Stake: advantages
- High energy efficiency compared to PoW
- Encourages 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
Proof of Stake: disadvantages
- Risk of economic centralization if few actors accumulate a large part of the stake
- Dependence on economic incentives 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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