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.
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 .
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.
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 .
A variety of different types of proof of stake have been developed and implemented across blockchain networks.
"Coin age" proof of stake
Casper proof of stake
Delegated proof of stake (DPOS)
Bitshares, EOS, Lisk
Others & hybrid
PoS with Masternodes
Proof of stake velocity (POSV)
Random block selection
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.
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.
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.
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.
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Documentaries, videos and podcasts
Formal Barriers to Proof-of-Stake Protocols - BPASE '18
Jan 30, 2018
- EthereumEthereum is an open-source, public, distributed blockchain computing platform featuring smart contract (scripting) functionality, which facilitates online contractual agreements.
- Proof-of-work systemA proof-of-work (POW) system (or protocol, or function) is an economic measure to deter DOS attacks and other abuses (e.g. spam) on a network by requiring some work from the service requester, usually meaning processing time.
- BlockchainA blockchain is an append-only digital ledger storing a set of time-ordered transactions grouped in blocks that are linked together using cryptographic hashes.
- NXTNXT is a digital currency and decentralized platform for building applications and financial services.
- PeercoinBitcoin derivative cryptocurrency and the first cryptocurrency to implement the Proof of Stake consensus.
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