Bitcoin, Ethereum, Cardano, Polkadot, Binance Smart Chain (BSC), and all public blockchains have one thing in common: They are decentralized.
Since there is no single entity in charge and the network should function as designed, there must be a means of confirming transactions.
Of the many, Proof-of-Stake (PoS) is a common consensus algorithm employed by most modern blockchains.
What is Proof-of-Stake?
Proof-of-Stake is a consensus style, a means of ensuring cryptocurrency transactions are validated trustlessly without the involvement of any centralized entity or organization. In this system, network validators need to stake a certain minimum amount of coins for a right to confirm transactions while also securing the network. The more a validator stakes—or locks coins—the higher the probability of being selected to confirm a block of transactions, therefore receiving block rewards.
It is is relatively more energy efficient than alternatives like Proof-of-Work used by legacy blockchains like Bitcoin and Litecoin. Instead of crunching complex mathematical problems using expensive and rare gear, all a validator needs to do is set up a validator node, stake coins, and wait to be selected as a block validator, qualifying for rewards. Validator selection is random, not a competition where the most efficient node stands to earn more rewards.What is Proof of Stake? Click To Tweet
Increasingly, third and fourth-generation blockchains like Cardano and others are, in one way or another, adopting Proof-of-Stake or its variant like delegated Proof-of-Stake applied by Tron. This choice is primarily because of energy efficiency and increasing criticism on Proof-of-Work systems blamed for high carbon emission and general energy inefficiency.
Proof-of-Stake systems guarantee the same level of blockchain security and more flexibility for coin holders since they can unlock their coins at any time. However, while PoS systems are energy efficient, there are risks of centralization since the system would reward validators with more coin holdings, ignoring new validators or pools with low amounts of locked coins.
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