Proof Of Stake
Proof Of Stake Explained
What Is Proof Of Stake?
The Proof of Stake (PoS) concept states that an individual can mine or validate block transactions consistent with how many coins they hold. This suggests that the more coins owned by a miner, the more mining power they need.
- With Proof of Stake (POS), cryptocurrency miners can mine or validate block transactions supported by the quantity of coins a miner holds.
- Proof of Stake (POS) was created as an alternate to Proof of Work (POW), which is that the original consensus algorithm in Blockchain technology, used to confirm transactions and add new blocks to the chain.
- Proof of Work (POW) requires huge amounts of energy, with miners needing to sell their coins to ultimately foot the bill; Proof of Stake (PoS) gives mining power supported the share of coins held by a miner.
- Proof of Stake (POS) is seen as less risky in terms of the potential for miners to attack the network because it structures compensation during a way that creates an attack less advantageous for the miner.
- Bitcoin, the most important cryptocurrency, runs on proof of work instead of proof of stake.
Understanding Proof Of Stake
The proof of stake was created as an alternate to the proof of work (PoW) concept, to tackle inherent issues within the latter. Currently, simplest altcoins use the proof of stake concept. When a transaction is initiated, the transaction data is fitted into a block with a maximum capacity of 1 megabyte, then duplicated across multiple computers or nodes on the network. The nodes are the administrative frame of the blockchain and verify the legitimacy of the transactions in every block.
To carry out the verification step, the nodes or miners could want to solve a computational puzzle, called as the proof of work problem. The primary miner to decrypt each block transaction problem gets rewarded with a coin. Once a block of transactions has been verified, it's added to the blockchain, a public transparent ledger.
How Proof Of Stake Addresses Mining Power
Mining requires an excellent deal of computing power to run different cryptographic calculations to unlock the computational challenges. The computing power translates into a high amount of electricity and energy wanted for the proof of work.
Risk Of Network Attack
Bitcoin makes use of a PoW system and as such is susceptible to a potential Tragedy of Commons. The Tragedy of Commons refers to a future point in time when there'll be fewer bitcoin miners available due to little to no block reward from mining. The only fees which can be earned will come from transaction fees which will also diminish over time as users prefer to pay lower fees for their transactions.