What is PoS?

15 November 2022
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What is PoS?

It was already told about the Proof-of-Work consensus algorithm and named the main disadvantage: it is very energy-consuming, so it is not environmentally friendly. In January 2022 several European countries even called for a complete rejection of Proof-of-Work and replace it with Proof-of-Stake, which is devoid of these disadvantages.

Features and advantages of the PoS consensus algorithm

Blockchain based on PoS is provided and supported by so-called validators - cryptocurrency owners. They are the ones who verify users’ transactions. For a transaction to be included in a new block, at least two-thirds of all validators must confirm that the transaction is correct.

Validators, unlike miners, only do efficient work - verification, whereas miners have to go through random numbers and constantly improve the equipment performance.

But even when using the PoS algorithm, validators still need powerful equipment, constant network access, and a wide Internet channel to provide fast and efficient performance. An ordinary laptop is not suitable for this purpose.

How it works

To participate in the validation process, a future validator pledges its coins to the blockchain network. He does not need to mine new blocks, but only to create them and check ready-made ones from other validators. The validator is rewarded for each such transaction. But if it turns out that he has committed fraud while working, the validator will be punished - he will be deprived of some of the pledged coins.

Any cryptocurrency owner can become a validator in the PoS network, but large owners have an advantage. If there are a lot of transactions in the network, it assigns holders of more collateral to validate more blocks. The reward, accordingly, is paid in proportion to the number of transactions processed. But nevertheless, the system works in such a way that validators with small collateral can also participate in the process and be rewarded.

A classic example of a smart network based on the PoS consensus algorithm is Binance Smart Chain (BSC), which has implemented the modern BEP-20 token standard, and AKRA tokens are successfully used within this network.

The advantage of the PoS algorithm is speed. Current PoW blockchains, even Bitcoin, will not be able to process transactions at the same speed as PoS systems. And for a network that claims to be the Internet of the future, speed is one of the main factors.


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