WTF is Proof of Stake?

In my last article I talked about proof of work, the most well known consensus mechanism used in the Bitcoin blockchain, as well as many others. You’re probably rolling your eyes at ANOTHER jargon acronym, but don’t worry, proof of stake is another one that isn’t too difficult once you break it down.

WTF is proof of stake?

Proof of stake (sometimes shortened to POS) is another consensus mechanism used in certain blockchain networks. It is less common than proof of work, but is growing in popularity because of the disadvantages of proof of work.

Problems with proof of work

There are a few reasons people are realising proof of work is maybe not the ultimate ideal consensus mechanism you can have in a blockchain network. Firstly, the power gobbled up by miners in Bitcoin and other networks is one of the major flaws people talk about because it’s not exactly friendly to the environment.

One of the other major challenges with distributed ledger technology in general is the ability to scale systems – basically build them big enough so they’re useful to people. Proof of work used within a network means that network does not scale easily, because the more transactions that are added to the network the more electricity needed to put them into blocks, and the slower everything gets.

That’s why the Bitcoin network can currently only handle 3-4 transactions per second at the moment and maximum 8-9 ( That’s a LOT slower than our traditional payment networks like VISA and Mastercard.

Another issue with proof of work is that it drives down the price of whatever crypto-asset is being mined. So in the Bitcoin network for example, miners win the new bitcoins in the form of the block reward and then they go and sell them for dollars/pounds/euros etc because they need to pay their electricity bills and most energy companies do not accept bitcoin (yet) as payment. This pushes the price of bitcoin down.

Proof of stake (nothing to do with vampires)

So proof of stake is being developed as an alternative to all this mining.

Proof of stake is different because there are no miners. It is still a consensus mechanism – which means it is still a way of getting the network to agree on the current state of affairs of the blockchain. So the purpose is the same. This is done despite no one knowing who anyone else is on the network, which is what makes the system so innovative and cool.

There are a few different things about proof of stake and how it works compared to proof of work.

How proof of stake works

Firstly, there are no miners. The equivalent people in a proof of stake network are called ‘forgers’. There are no new crypto-assets created in the process of forging, like in proof of stake. This is usually called the block reward – but in proof of stake systems doesn’t exist. In proof of stake, the way forgers get rewarded for what they do is purely through transaction fees paid by people sending transactions through the network.

There is a pool of validators. Validators are basically potential forgers. So everyone joins this pool hoping to be the chosen one (a bit like in Bitcoin where everyone wants to be the miner who wins the race to mine the next block). Anyone can join the validator pool, so it’s all nice and inclusive.

Knights of the round table

Validators ‘stake’ their crypto which means they slam it down on the table saying ‘I will give you this much crypto to be the forger (and receive the transaction fees) and if I don’t forge properly you can take it from me’. I think of it like knights of the round table where everyone is wearing chainmail and helmets and they drive a sword into the table (with gold-encrusted crypto symbols) and each make their stake….
But that’s just me getting carried away.

The more crypto you stake the more chance you have of being the forger selected from the validator pool. So if one of them has only staked 2% of all the crypto available in that network, they will only theoretically have the ability to validate 2% of the blocks.

Continuing with the round table – one of the knights will be chosen to be the forger for the next block by the algorithm in the network. He will get up from the table victorious and collect the transaction fees rewarded for validating that particular block. Then another block will come along needing to be validated and the whole thing will happen again.

Who is using proof of stake?

I said proof of stake is being considered as an alternative to proof of work. Ethereum is the best known network looking to implement proof of stake. They will update the Ethereum protocol sometime in the near future with a round of updates called ‘Casper’, which will include a move from proof of work to proof of stake.

The move is supposed to be gradual, with both mechanisms operating simultaneously for some time first. One block every 100 blocks will use proof of stake, then gradually this will increase to be the full amount of blocks mined.

Another network that uses proof of stake is NXT. There is more and more interest growing in proof of stake as a more environmentally friendly and economic consensus mechanism compared to proof of work, so it’s likely we’ll see more protocols being built using this system.

Delegated POS

There is another modification in the proof of stake mechanism (I know, another different consensus protocol – how many versions can you have?! Answer = many!) that is in development by some companies. Delegated proof of stake involves exactly what it sounds like – you delegate your validation to someone else, probably an experienced validator with better hardware who interacts more frequently with the blockchain than you.

There is a downside to this, in that if you and I delegate to the same person or business because they’re well known for doing a good job of validation and have a substantial market share in that industry, the likelihood is lots of other people will delegate their vote to them as well.

Suddenly a handful of companies may be performing the validation for one particular protocol and it doesn’t look as decentralized as it was designed to be. But people are working on solving that problem, because delegating your stake will make it easier on a practical level for people to interact with proof of stake systems.

More and more proofs

We’ve looked at proof of work and proof of stake, but there are more out there: proof of authority, proof of time, proof of probably anything you can think of. Next time you’re reading about a blockchain company or you meet someone working in the area, you can be confident you know about the two main consensus mechanisms out there.

127 Trackbacks / Pingbacks

  1. viagra walmart
  2. cheap viagra
  3. viagra 100mg
  4. ed medications
  5. pills for ed
  6. cheap erectile dysfunction pills
  7. buy generic cialis
  8. canada online pharmacy
  9. cialis visa
  10. vardenafil usa
  11. levitra price
  12. generic levitra online
  13. slot games
  14. casinos
  15. discount viagra
  16. casinos
  17. casino slots
  18. discount cialis
  19. installment loans
  20. cash payday
  21. payday loans
  22. best real money online casinos
  23. viagra for sale
  24. online betting with paypal
  25. 20 cialis
  26. cialis 20
  27. cialis buy
  28. efcaxdszdfszgd
  29. m980u9oy9y98o8y9pm
  30. 20 cialis
  31. m90uojmuy7hjhhhh
  32. rxc43rw435tr53t453t
  33. buy cialis
  34. cialis 5 mg
  35. canadian pharmacy viagra
  36. taxi to brighton
  37. taxi transfers to gatwick
  38. online casino
  39. real money casino online
  40. gambling casino
  41. generic viagra india
  42. viagra reviews
  43. where to buy viagra online
  44. generic viagra canada
  45. buy viagra without prescription
  46. Selfie Face Mask
  47. order viagra
  48. buy cialis
  49. cxqw234xracrwcr4
  50. xdsffx4crta4rtxa34w
  51. viagra pills
  52. buy viagra cheap
  53. viagra without doctor prescription subscription
  54. cialis online reviews
  55. viagra without prescriptions
  56. buy cialis online
  57. order viagra online
  58. buy viagra
  59. buy cialis
  60. cheap levitra online
  61. cialis tadalafil
  62. online casino usa
  63. buy viagra germany
  65. can i buy viagra
  66. where buy viagra
  67. azithromycin online cheap
  68. generic cialis india
  69. cialis generic cialis
  70. viagra buy
  71. hydroxychloroquine 400 mg buy online
  72. canadian pharmacy viagra
  73. cheap cialis
  74. tadalafil without a doctor prescription
  75. cheap generic viagra
  76. purchase viagra online
  77. cialis prices
  78. order viagra
  79. viagra canada
  81. cialis generic
  82. viagra orange county
  84. brand cialis canada
  85. buy female viagra
  86. viagra cost
  87. shelf life of cialis
  88. cialis prices at walmart
  89. online viagra without subscription
  90. otc viagra cvs
  91. viagra online pharmacy
  93. uscojufm9r4tue4urtse4
  94. ka-insider
  95. mua hạt macca ở đâu uy tín
  97. royal cbd oil
  98. royal cbd
  99. royal cbd products
  100. super viagra plus
  107. cbd oil
  108. viagra trial offer
  109. How to get viagra
  110. mitrade lừa đảo
  111. que es webhelper
  112. taking viagra daily
  113. 3 dollar viagra
  114. approved pharmacies
  115. 메리트 카지노
  117. 918kiss
  118. viagra stories
  119. 메리트 카지노
  120. canadian natural skin care products
  121. orange nj
  122. cbd for pets
  123. 메리트카지노
  124. xe88 dealer
  125. Canadian healthcare viagra sales
  126. proven side effects
  127. cialis jakarta

Leave a Reply