Proof of stake is a consensus system that secures the network by locking up crypto. It uses less energy than Bitcoin’s proof of work process.
What exactly is Proof of Stake? What Makes It Unique
Mining bitcoin consumes a lot of electricity. But it doesn’t have to be that way.
The Ethereum community has been striving to modify how Ether money is minted in order to drastically minimize the carbon footprint of the blockchain. The approach it is pursuing is known as proof of stake (PoS).
Proof of stake is an alternative to proof of work (PoW), which is presently used by Bitcoin and Ethereum.
Consensus procedures include both PoS and PoW.
Mechanisms of Consensus
At their most fundamental, public blockchains are just databases.
Most databases restrict who may access and change them. This centralized control is convenient, but it exposes them to hacking. Blockchains, on the other hand, make everyone who uses the software—from exchanges to basement traders responsible for maintaining it.
That seems complex, which is why blockchains employ “consensus procedures” or “consensus algorithms.” Consensus techniques keep the network running by ensuring that only valid transactions are put to blocks. It is the result of all the nodes—or computers running the blockchain software—concluding, “Yes, this is true.”
In doing so, they protect against “51% attacks,” which occur when someone obtains control of more than half of the computing power in a distributed network.
Proof of Work
Bitcoin employs the proof-of-work consensus process to avoid attacks that allow money to be spent twice. That method requires users to employ hardware (and power) to assist the network in processing transactions. Miners (or, more precisely, their computers) compete to solve fiendishly complex riddles in order to be the first to complete a block of transactions in proof of work. Their work contributes to the verification of the transactions’ legitimacy. They are compensated with cryptocurrencies such as Bitcoin.
Proof of work was included in the architecture of Bitcoin and has since been emulated by other cryptocurrencies such as Ethereum. However, one of the drawbacks of this approach is that it takes a large number of machines to answer difficult issues, the overwhelming majority of which is rendered immaterial save for the energy consumed by the winning miner.
Proof of Stake
Proof of stake on Ethereum 2.0 seeks the same result as proof of work: the safe verification of transactions on the blockchain.
PoW miners devote hardware resources (big, costly computers) to network security, whereas PoS “validators” devote their coins. To be eligible to validate transactions in a block and get the accompanying fees in PoS, validators must lock up, or stake, at least 32 ETH that they cannot spend. The blockchain secures the network by utilizing that locked-up crypto.
The Ethereum Foundation claims that proof of stake offers various benefits over proof of work.
- ?️ Since earning rewards isn’t based on having the most computing power, you don’t need super-fancy hardware.
- ? Because of the lower hardware requirements, proof of stake uses far less energy than proof of work.
- ?? More people can participate in running an Ethereum node, which will allow for further decentralization and more resistance to 51% attacks.
How Does the Network Select?
The network chooses validators at random to propose new blocks.
They are also randomly assigned to committees of 128 nodes, which alter on a daily basis. The PoS consensus mechanism selects various committees to “attest” that the proposed block is accurate each time a new block of transactions is produced and added to the blockchain database.
Validators are rewarded for both creating blocks and attesting to the creation of other blocks. Validators are penalized if they are offline or do not provide proper attestations. They may lose their whole stake if they attempt to assault the network.