What Is Proof-of-Stake?

What Is Proof-of-Stake?

Proof-of-Stake (PoS) is a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. In PoS-based cryptocurrencies, the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e., the stake). In contrast, the algorithm of proof-of-work systems selects miners based on their hash power, which is a function of computing power as opposed to wealth.


In proof-of-stake, the creator of the next block is chosen via various combinations of random selection and wealth or age (i.e., the stake). The more coins held by an individual miner, the higher the chances are that he will be chosen to create a new block. This incentivizes miners to work with honest nodes only because they have more to lose if they act maliciously. The first miner who solves the puzzle gets rewarded with cryptocurrency and transaction fees. For this reason, mining rigs are usually built with high performance hardware such as GPUs and CPUs rather than ASICs (Application Specific Integrated Circuits), which have much lower efficiency for solving these kinds of algorithms. In other words, it takes an enormous amount of electricity and computing power to mine cryptocurrencies like Bitcoin.


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