What is Proof of Stake?

11 Jun 2018
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Proof of stake, often abbreviated PoS, is newer on the blockchain scene than the original Proof of Work

PoS is an alternative system for verifying transactions in a blockchain environment. It is not based on the amount of computational work completed by a miner, but instead requires those who validate transactions to hold a specific amount of units of a particular digital currency—a proof of stake in that currency.

Whereas in PoW, miners mine blocks to uncover new coins and verify transactions, in proof of stake systems, forgers forge or mint new blocks while validating transactions.

Since mining is not a process in PoS systems, incentivization works differently than in PoW systems. In PoS systems, forgers put their own coins at stake in order to validate transactions, and if they validate a fraudulent transaction, they lose the money they staked and their ability to participate as a forger. As an incentive, forgers receive transaction fees for their efforts.

Proof of stake has benefits in terms of network safety and energy consumption due to increased efficiency, and it is used in digital currencies like DASH and NEO.