# Proof of Stake (PoS) 1. A novel [[Consensus Mechanism (algorithm)|consensus]] protocol in which, instead of [[Mining|mining]], [[Node(s)|nodes]] can validate and make changes to the [[Blockchain|blockchain]] based on their existing economic stake. 3. An [[algorithm]] that rewards participants that solves difficult [[[Cryptography|cryptographic]]] puzzles to achieve [[Distributed Consensus]]. Unlike [[Proof of Work (PoW)]], a person can validate [[Transaction(s)|transactions]] and create new blocks based on their individual wealth (i.e. stake) such as the total number of [[Coin(s)|coins]] owned. One of the key advantages that PoS has over PoW is lower energy consumption. 4. The [[Consensus Mechanism (algorithm)|mechanism]] by which participants earn the right to add new blocks and so earn new tokens, based on how much of that currency they already hold. 5. Another alternative to [[Proof of Work (PoW)]], this caps the reward given to [[Miner(s)|miners]] for providing their computational power to the network, at that miner’s investment in the [[Crypto (cryptocurrency)|cryptocurrency]]. So if a miner holds three [[Coin(s)|coins]], they can only earn three coins. The system encourages miners to stick with a certain blockchain, rather than converting their rewards to an alternate cryptocurrency. 6. A [[Distributed Consensus|consensus distribution]] algorithm that rewards earnings based on the number of coins you own or hold. The more you invest in the coin, the more you gain by mining with this protocol. 7. A [[Consensus Mechanism (algorithm)|consensus algorithm]] that chooses the owner of a new [[Block(s)|block]] based on the wealth they have or (Stake). There is not a [[Block Reward|block reward]] so the forgers take the [[Transaction Fee|transaction fee]]. 8. [[Proof of Work (PoW)]] requires extensive energy consumption. Over the past a few years, the rising value of bitcoin boosted the demand for GPU. Some chip companies create custom chips solely for mining. Unlike POW, POS is based on the participants’ [[Coin(s)|coin]] stake. The more coins the staker has, the more likely the staker will add a new [[Block(s)|block]] of the transaction to the [[Blockchain|blockchain]]. There’s no block reward in POS. The staker’s rewards are only the transaction fee. Because of lower energy-intensive compared to POW, POS system is suited for platforms with static coin supply. Most crowdsale-funded platforms leverage this approach to distributing [[Token(s)|tokens]] based on investment. 9. Proof-of-Stake is an alternative to the [[Proof of Work (PoW)]] system, in which your existing stake in a [[Crypto (cryptocurrency)|cryptocurrency]] (the amount of that currency that you hold) is used to calculate the amount of that currency that you can [[Mining|mine]]. The more stake you own, the more likely you are to generate a [[Block(s)|block]]. In theory, this should prevent users from creating forks because it will devalue their stake and it should save a lot of energy. Proof of Stake sounds like a good idea, but ironically, there is the “Nothing at Stake” problem. Since mining [[Bitcoins]] is costly, it is not smart to waste your energy on a fork that won’t earn you any money, however with Proof of Stake, it is free to mine a [[Fork|fork]]. 10. Proof-of-stake (PoS) is a method by which a cryptocurrency [[Blockchain|blockchain]] network aims to achieve distributed consensus. While the [[Proof of Work (PoW)]] method asks users to repeatedly run hashing algorithms or other client puzzles, to validate electronic transactions, proof-of-stake asks users to prove ownership of a certain amount of currency (their “stake” in the currency). [[Peercoin]] was the first cryptocurrency to launch using Proof-of-Stake. Other prominent implementations are found in [[BitShares]], [[Nxt]], [[BlackCoin]], NuShares/NuBits and [[Qora]]. [[Ethereum (blockchain)]] has planned a hard fork transition from [[Proof of Work (PoW)]] to PoS consensus. Decred hybridizes PoW with PoS and combines elements of both in an attempt to garner the benefits of the two systems and create a more robust notion of [[Consensus Mechanism (algorithm)|consensus]]. With Proof of Work, the probability of mining a block depends on the work done by the miner (e.g. CPU/GPU cycles spent checking [[Hash|hashes]]). In the case of [[Bitcoin (blockchain)]], with Proof of Stake, the resource that’s compared is the amount of Bitcoin a [[Miner(s)|miner]] holds – someone holding 1% of the Bitcoin can mine 1% of the “Proof of Stake blocks”. Instead of sacrificing energy to mine a block, a user must prove they own a certain amount of the [[Crypto (cryptocurrency)|cryptocurrency]] to generate a block. The more stake you own, the more likely you are to generate a block. In theory, this should prevent users from creating forks because it will devalue their stake and it should save a lot of energy. Proof of Stake sounds like a good idea, but ironically, there is the “[[Nothing at Stake problem|Nothing at Stake]]” problem. Since [[Mining|mining]] Bitcoins is costly, it is not smart to waste your energy on a [[Fork|fork]] that won’t earn you any money, however with Proof of Stake, it is free to mine a fork. 11. Is an alternative to the [[Proof of Work (PoW)]] system, in which your existing stake in a [[Crypto (cryptocurrency)|cryptocurrency]] (the amount of that currency that you hold) is used to calculate the amount of that currency that you can [[Mining|mine]]. 12. Is a security method in [[Crypto (cryptocurrency)|cryptocurrency]], and a tool of achieving [[Consensus Mechanism (algorithm)|consensus]] in which there is a greater chance of creating a new [[Block(s)|block]]. The profit will be achieved by the users with a large amount of [[Coin(s)|coins]] in the account. 14. A novel [[Consensus Mechanism (algorithm)|consensus]] protocol in which, instead of [[Mining|mining]], [[Node(s)|nodes]] can validate and make changes to the [[Blockchain|blockchain]] on the basis of their existing economic stake. 14. Proof-of-stake pushes people who own a selection of a [[Blockchain|blockchain]]’s tokens to make decisions on validating the chain. In practice, it’s a much less energy-intensive practice than [[Mining|mining]]. 15. With Bitcoin’s high cost of [[Mining|mining]], blockchain developers sought cheaper alternatives that didn’t require burning high amounts of energy. The first of these alternatives is proof of stake (PoS), which allocates the level of responsibility in maintaining the public [[Ledger|ledger]] to a [[Node(s)|node]] according to the number of [[Coin(s)|coins]] it holds. The more coins a node holds, the more chances it has of being picked to update the ledger. Since PoS requires neither burning of energy nor specialized hardware, it is one of the cheapest blockchain [[Consensus Mechanism (algorithm)|consensus]] protocols. It is also one of the most inclusive, as all coins holders in a network stand a chance to participate in the mining process. Blockchain networks that use proof of stake include [[Peercoin]], [[Nem]] and [[Dash]]. [[Ethereum (blockchain)]] is also planning to move its protocol from proof of work to proof of stake when it adopts its [[Casper]] system. 16. For Proof of Stake, [[Miner(s)|miners]] still process and validate [[Transaction(s)|transactions]], but do so by proving that they have ownership of a certain amount of the asset, rather than by performing energy-intensive computations. For PoS, miners “lock up” their assets (that’s the “stake”) and then promise to fairly process transactions: If they do an honest job, they get rewarded with [[Transaction Fee|transactions fee]] payments, but if they try to cheat, they get penalized and lose some or all of their locked assets. So in short, this system financially incentives honest behavior. Proof of Stake is designed to be more environmentally friendly than [[Proof of Work (PoW)]]. 17. **Proof of Stake (PoS)** is a class of [[Consensus Mechanism (algorithm)|consensus algorithm]] that selects and rewards [[Validator Nodes|validators]] as a function of a validator’s economic stake in the network. Unlike P[[Proof of Work (PoW)]], the probability of creating and/or attesting a block and maintaining security in the network is not a result of hashpower from burning energy, but rather the result of economic value-at-loss.