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Proof-of-Stake (PoS) is a consensus algorithm were a person can mine or validate block transactions according to how many coins/tokens that person holds. PoS was created as an alternative to Proof-of-Work (PoW), the original consensus algorithm in blockchain technology. As blockchain technology rapidly expands into fields other than crypto, the PoW protocol is being left behind, mainly because of its' inefficiency and archaic nature.
PoS is favored when it comes to unrelated crypto areas such as logistics, big data analysis, artificial intelligence, and other mathematical fields of work. Compensation is structured in a way that makes an attack less advantageous for the miner, so the risk of a cyber attack is less-likely than others. A PoS miner utilizes far less energy than PoW, which could gear towards a greener future for crypto. As of writing this article, the amount of electricity to power just one Bitcoin transaction using PoW is equivalent to powering 1.57 American households for an entire day.
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Please do your own research before making any decisions before investing.
This article is meant for educational purposes only.
The significance of utilizing PoS is becoming more apparent the more exposure it receives. It is an elegant solution to creating a trustless system that can be used for large-scale currencies like Ethereum and smaller institutions alike. For this still a bit unfamiliar, PoS is a method of validating blocks on a blockchain by having individuals vote on individual blocks. In order to be eligible to vote, the individuals must provide a "stake". This is commonly a crypto of some choice. Different PoS networks demand different quantities of a currency to be staked, raising the bar of entry. The higher the stake, the more voting power the validator has and the more crypto mined for contributing to the blockchain.
While nothing is 100% secure from cyber attacks, PoS consensus shines as a contemporary mechanism. Some PoS systems deduct or burn a certain about of staked crypto from an individual who tries to act maliciously on the blockchain (ie attempting to validate on minority voted chains). In an attempt to halt 51% attacks, where groups of miners control more than 51% of the network's mining hash rate and interrupt the blockchain, PoS can set the amount needed to stake to reach 51% so high that it wouldn't even be beneficial to the hacker to carry out the attack.
To fully understand why PoS will be the future of blockchain technology, we need to compare it to PoW. As I mentioned above, PoW requires massive amounts of electricity to operate the system. Not only that, but PoW requires high-grade computer systems in order to run the protocol, which often need upgrading if the system begins to grow larger in size. This creates an "arms race" between miners. The more high-end and efficient the GPUs used, the higher chance of that miner receiving rewards on the PoW system. This will rally other miners in the system to jump on board with the same GPUs, creating scarcity in the marketplace. Since PoS does not require this amount of electricity, it's easily ran and can usually be done so on fairly weaker systems, such as your standard desktop computer.
It's not entirely easy for an institution or organization to run a PoS blockchain as they will need a few additional resources. They will need to have a reasonable amount of people willing to act as validators. They will also need to ensure that every validator has something substantial to stake. This is where the unique coin/token is created. They can be distributed either by the company giving them out or being available for purchase. Once received, the employee is granted staking rights. The validator will also need to run their own masternode on the blockchain so that they can vote on certain blocks to keep the chain going. It's a very possible solution for a company looking to expand into blockchain technology. This will keep their data secured, traceable, and finite.
The nature of blockchain technology is trustless and decentralized. It has given rise to thousands of new opportunities and has provided benefits to businesses by offering enhanced security, greater transparency, and easier traceability. There are a few different consensus algorithms for blockchain technology that serve great purposes in their own way, but PoS is beginning to shine above the rest. The ease of adaptation of the protocol while utilizing fewer resources is what will set PoS apart from the rest moving forward, as the world collectively is becoming more eco-friendly and crypto-crazy simultaneously.
Do you believe that PoS consensus will be the blockchain technology of the future?
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