How does Proof of Stake work?

How does Proof of Stake work?

In the cryptocurrency universe, Proof of Stake (PoS) is an alternative to Proof of Work (PoW).

While PoW seeks to guarantee that each network participant has performed a certain amount of work in order to receive a reward, Proof of Stake requires participants to prove that they are willing to guarantee the integrity of their participation by “risking” a certain amount of cryptocurrency in the minting process. Participants thus “stake” a certain amount every time they verify a block of transactions.

If the block is verified by other staking nodes, the block leader who first verified it will receive the block reward.

In practice, PoS works a lot like a trust fund where money is committed during a certain period in exchange for a return in the form of interest rates.

PoS is seen as an alternative to PoW because it uses less energy to mint coins and seems a lot more familiar to bond and treasury investors.

Cryptos using PoS include Cardano ADA, Dash, NEO, PIVX, OkCash, NAV Coin, Stratis and Reddcoin.

See Also: Proof of Work

 

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