Proof of Stake (PoS)

Proof of stake is a consensus mechanism used by the blockchain networks to achieve transaction confirmation. It was developed as an alternative to the proof of work used by the Bitcoin blockchain network.

PoS allocates blocks on the basis of the number of coins staked by the participants as compared to the proof of work which otherwise makes miners compete to validate the blocks based on their hashing power. Blockchain systems like Cardano are based on the PoS consensus mechanism. Ethereum, the world’s second largest crypto asset by market capitalization, currently runs on PoW but is soon going to hop onto the PoS mechanism. The upgrade has already begun.

The proof of stake systems are highly energy efficient compared to a PoW network. It is also more environmentally friendly. However, one of the drawbacks of this mechanism is that many believe it is prone to centralization as well as manipulation because the stakeholder with more staked coins clearly has more say in a decision being taken. To avoid this issue by PoS, DPoS was introduced.

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