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Proof-of-stake

Proof-of-stake

Proof-of-stake (PoS) is a system by which a network (e.g., a cryptocurrency blockchain) aims to achieve distributed consensus.

Proof of stake(PoS) is a type of consensus algorithm that relies on participants having an economic stake in the success of the network. Unlike (PoW) based systems/algorithms where the algorithm rewards participants who solve computationally expensive puzzles in order to validate transactions and create new blocks (i.e. mining), in PoS the creator of the next ledger update (eg a blockchain block) is chosen in a deterministic and pseudo-random way where the probability that an account is chosen depends on the accounts stake in the system (eg its wealth in a system).

Proof of stake has been contrasted to proof of work as virtual mining, simplified with the phrase "One coin, one vote" as compared to proof of work's "one cpu, one vote". Users are required to 'stake' their cryptocurrency to become a network validator.

History

The first example of a blockchain utilizing a PoS system was , proposed by Sunny King and Scott Nadal in 2012. Other early PoS blockchains include Blackcoin and .

Nothing at stake problem

Naive proof of stake algorithms suffer from the . The nothing at stake problem is characterized by the incentive for network participants to contribute blocks to every potential blockchain fork to ensure they receive a block reward on the winning chain.

Transition from PoW

A number of blockchains have transitioned, or are in plans to transition from PoW to PoS. for example plans on moving from a proof of work protocol using to a proof of stake consensus protocol utilizing .

Proof of stake variants

A variety of different types of proof of stake have been developed and implemented across blockchain networks.

Proof of stake type
Blockchains

"Coin age" proof of stake

Peercoin

Casper proof of stake

Ethereum, Rchain

Delegated proof of stake (DPOS)

Bitshares, EOS, Lisk

Others & hybrid

Nexus, Decred

Ouroboros

Cardano

PoS with Masternodes

Dash, PIVX

Proof of stake velocity (POSV)

Reddcoin

Random block selection

NXT, Blackcoin

Advantages
Energy efficiency

Proof-of-Stake (PoS) eliminates the use of high-powered computing from the consensus mechanism for securing blockchain networks used by proof-of-work (PoW). This make PoS more energy efficient and environmentally friendly when compared to PoW consensus mechanisms being used by cryptocurrencies such as Bitcoin and Dogecoin.

Security

PoS incentivizes security through rewards and punishments for behaviours that make the PoS network more or less secure. Some critics view PoS staking as creating more security or less security for PoS networks. If stakers attempt to attack PoS networks they may have their stake in the network taken away from them for acting maliciously towards the network.

Lower barriers to entry

PoS also supports decentralization because PoS is more likely to produce more nodes on the network compared to PoW consensus mechanisms due to lower barriers of entry. There are no hardware requirements necessary to become a validator on a PoS blockchain network, making individual validators more likely to be chosen to create new blocks without the need for investing in expensive mining equipment and energy required by PoW consensus.

Criticisms

The security and scalability properties of proof of stake mechanisms as compared to proof of work mechanisms continue to be debated in the blockchain community. PoW uses an external form on collateral in the form of computational and energy resources to secure the network which incentivizes miners to not act maliciously towards the network because mining is resource intensive.

Timeline

People

Name
Role
LinkedIn

Further reading

Title
Author
Link
Type
Date

A (Short) Guide to Blockchain Consensus Protocols

Amy Castor

A Provably Secure Proof-of-Stake Blockchain Protocol

Aggelos Kiayias,Ioannis Konstantinou, Alexander Russell, Bernardo David, Roman Oliynykov

Academic paper

Consensus in Blockchain Systems. In Short.

Chris Hammerschmidt

Cryptocurrencies Without Proof of Work

Iddo Bentov, Ariel GabizonAlex Mizrahi

Academic paper

Inflation and participation in stake based token protocols

Doug Petkanics

Ouroboros: A Provably Secure Proof-of-Stake Blockchain Protocol

Aggelos Kiayias, Alexander Russell, Bernardo David, Roman Oliynykov

Academic paper

Proof of Stake versus Proof of Work

BitFury Group

Documentaries, videos and podcasts

Title
Date
Link

Formal Barriers to Proof-of-Stake Protocols - BPASE '18

Jan 30, 2018

Companies

Company
CEO
Location
Products/Services

References

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