What is PoS And How Does PoS Work?
Do you want to know what is PoS and how one can conclude that a coin has a Proof of Stake protocol? Then read our explanation below.
What is PoS (Proof of Stake)?
Proof of Stake (PoS) is a concept that allows an individual to validate block transactions depending on the number of coins he or she holds within the network. This means that the more cryptocurrency one holds, the more validating power he or she has.
Proof of stake explained
To understand how PoS works, we need to compare it with its predecessor, PoW. While proof of work utilizes miners who can work alone or in collaboration (mining pools), PoS chooses only one validator (node) to confirm a transaction.
Not only does this model use considerably less energy than PoW, but it also is more decentralized than mining pools, since there is no option to create mining pools.
For a user to participate as a validator, he would need to deposit a number of coins (POS coins) into the coin’s network as a stake. The size of the deposit increases his chances of being chosen to validate the next block.
Best of PoS coins
Best of PoS coins are the following: Decred, Stellar Lumens, Ontology, Komodo, Dash, NEO, Pivx, Lisk, Stratis
How does the future look like for PoS?
Proof of Stake consensus has been rapidly growing in popularity and there are several reasons for that:
- Staking is a more democratic way to distribute rewards in the network. This is because the participating nodes do not need to be “enhanced” with expensive mining equipment. Instead, all that is required is for users to lock their funds in the wallet.
- The majority of crypto investors consist of millennials. And, for this younger generation, the idea of passive income is a very “hot” topic at current times. As such, the concept of PoS promises seems very promising and luring. This is because it offers annual returns without actually doing any type of work. Users only need to lock their funds for a given amount of time to receive daily returns.
- Proof of stake is a lot better for the environment as it requires significantly less electricity to confirm transactions on the network. Apart from that, the amount of nodes that actually confirm transactions is much lower than PoW. It also is a lot more expensive to join. Therefore, we can expect that this trend will continue in the future.
Where can I learn more about Proof of Stake?
We have researched and documented the PoS consensus protocol extensively on our blog. You can further improve your knowledge by reading the following articles:
- What is Staking – In this short post, we explain what PoS staking is and how it works. This is a great post if you have a limited amount to invest and wish to learn the basics.
- Best staking coins – We recently created an in-depth guide on the best coins that reward users with their staking model. In there, you will not only see our favorite picks, but also a step-by-step guide on how to start staking your coins. This is a great resource for investors who want to start earning passive income through PoS coins.
- PoW vs PoS – This article is a little more technical. In it, we explain the main differences between Proof of Work and Proof of Stake. We also list the pros and cons of each consensus method, to help you get a better overview. This article is great for people who want to get a better understanding of the technical differences between the two options.
And that’s it! We hope you found this short FAQ post valuable. If any questions remain, or you wish to make add something to the post, make sure you leave a comment in the comment section down below.