Proof-of-Stake (PoS)

What Is Proof-of-Stake (PoS)?

Proof-of-Stake (PoS) is a consensus algorithm used by many blockchain networks to validate transactions and secure the network. It works differently than Proof of Work, which requires miners to solve complex mathematical problems in order to add new blocks to the chain. Instead, PoS relies on users who hold coins or tokens in their wallets as “stakers”. These stakers are chosen randomly from those with coins/tokens in their wallet and they must put up a certain amount of money as collateral for validating transactions. If they successfully validate a transaction, they receive rewards such as newly minted coins or fees associated with that transaction.

The main advantage of using PoS over other consensus algorithms is its energy efficiency; it does not require large amounts of electricity like Proof-of-Work does since there is no mining involved. Additionally, because staking rewards are distributed among all participants instead of just one miner, it creates more decentralization within the network and makes it less vulnerable to attack from malicious actors trying to control the majority of hashing power on the network. Finally, PoS also helps reduce inflation since only a limited number of new coins can be created each year through staking rewards rather than being mined out like Bitcoin’s block reward system

See also  Tokenized Securities

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