Proof-of-Stake (PoS)

Proof-of-stake is a type of consensus algorithm in which a blockchain network aims to achieve distributed consensus.

It is also process used to reach an agreement on a single data value.

In PoS-based cryptos, the creator of the next block is chosen through various combinations and parameters.

In essence, an individual person can mine or validate block transactions based on how many coins he or she holds.

Adhering to this concept, the more Bitcoin or altcoin owned by a miner, the greater the mining power he or she has.

On a blockchain network, consensus algorithms are used to confirm transactions.

They ensure that each block (bundle of data) that is added to a blockchain (public ledger) is the singular version of the truth, which prevents fraudulent transactions and other kinds of tampering.

Understanding PoS Algorithms

PoS algorithms do not select the nodes that confirm transactions based on how powerful their equipment is.

Instead, the nodes that confirm transactions (called forgers or minters) are selected randomly from a pool of nodes that continuously hold or stake a certain amount of cryptocurrency in a network.

In other words, nodes are chosen to confirm transaction based on their wealth.

Most PoS networks have a limited number of crypto-coins, all of which are already in circulation.

Therefore, forgers do not receive rewards from an uncirculated supply. Instead, they receive payment in the form of transaction fees.

By extension, Proof-of-Work (PoW) are another type of consensus algorithm entirely.

These reflect a process that is used to reach an agreement on a single data value.

PoW can help deter denial-of-service attacks and other forms of service abuse, most notably spam on a network by requiring some work from the service requester.