What is Proof of Stake (PoS)?

What is Proof of Stake (PoS)

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In a proof of stake (PoS) protocol, a new block’s creator is chosen deterministic, depending on their stake (how many coins they hold) in the cryptocurrency. This is in contrast to proof of work (PoW) protocols, where the creator of a new block is chosen based on their ability to solve a computationally difficult problem.

Here’s how a PoS protocol typically works:

  1. The network selects the next block producer (often called a “validator“) through a randomized “lottery” based on their stake. For example, someone who holds 1% of the coins has a 1% chance of producing the next block.
  2. The chosen validator broadcasts the next block to the network, including a hash of the previous block (to ensure the integrity of the blockchain).
  3. Other validators on the network check the block to ensure it is valid and then “vote” on it by including it in the blockchain.
  4. Once a sufficient number of votes have been cast (e.g., 66% of all validators), the block is considered “confirmed” and is added to the blockchain.

Benefits of using a PoS protocol

  • It is more energy efficient than PoW, as it does not require miners to perform computationally expensive work.
  • It is typically faster than PoW, as blocks can be produced more frequently.
  • It can be more decentralized, as anyone with a stake in the cryptocurrency can participate in block production.
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However, PoS protocols also have some drawbacks:

  • They can be vulnerable to “nothing at stake” attacks, where validators have no financial incentive to act honestly (e.g., because they do not stand to lose anything if they act maliciously).
  • They can be vulnerable to “long-range” attacks, where an attacker can create a version of the blockchain going back to the beginning of the cryptocurrency’s history and attempt to “replay” it on the current network. This can allow the attacker to double-spend coins, as the validators on the current network will not be aware of the transactions in the attacker’s version of the blockchain.
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