Proof of Stake (PoS) is a consensus mechanism protocol that chooses validators based on the value of their holdings. This algorithm encourages participants to have a “stake” in the success of the blockchain network.

This is altogether different from Proof of Work’s (PoW) which was the first sensation down history lane. Here’s the case for staking and why Proof of Stake was introduced.

Proof of Work, as its name implies, required that miners solve a complex mathematical equation to add new blocks and earn rewards. This, however, needed high computational power and consumed a lot of needless energy.

Enter Proof of Stake (PoS)

Proof of Stake (PoS) was first introduced formally as a solution to Proof of Work’s (PoW) high energy consumption problem. This was presented in an August 2012 paper by Sunny King and Scott Nadal who proposed an alternative mechanism referred to as “staking”. According to them, the choice of nodes would depend on the number of tokens any participant has. This implies that stakers (now referred to as validators) could stake more tokens to add blocks to the chain and reap the reward.

This staking approach forms the basis of the PoS consensus mechanism and was first implemented in a peer-to-peer cryptocurrency known as Peercoin.

Today, PoS offers other variations, one of which is the Delegated Proof of Stake (DPoS) from which the word delegation comes.

After the introduction of PoS in 2012, it became evident that other consensus mechanisms could exist. Especially since PoS, despite its apparent benefits over PoW, wasn’t without its flaws. Most notably is the fact that wealthy stakers had an advantage since rewards were handed out based on how much is staked.

Nevertheless, this was addressed by Daniel Larimer in July 2014 when he implemented an improvement on PoS through the Delegated Proof of Stake (DPoS) consensus mechanism.

DPoS is a mechanism that allows participants to delegate the role of validation to another node. It has a similar approach to PoS but here, only chosen delegates participate in staking. The remaining participants can join indirectly by contributing to the staking pool of their preferred delegates which offers several advantages over the PoS approach.

Participants don’t have to assume any responsibility they would normally have resumed if they were the validators themselves. This means that if any participant doesn’t have the time or resources to stake, they can simply delegate the responsibilities to another.

The delegation approach also addresses and reduces the advantage problem for wealthy participants that is apparent under PoS. Anyone, no matter the value being held, can stake their tokens indirectly. Then, the block rewards are shared according to each user’s stake.

Laimer, former Chief Technology Officer of EOS, first implemented DPoS on BitShares in 2015. Since then, other blockchains such as EOS and Lisk use it.

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Proof of Stake (PoS) is a consensus mechanism protocol that chooses validators based on the value of their holdings. This algorithm encourages participants to have a “stake” in the success of the blockchain network.

This is altogether different from Proof of Work’s (PoW) which was the first sensation down history lane. Here’s the case for staking and why Proof of Stake was introduced.

Proof of Work, as its name implies, required that miners solve a complex mathematical equation to add new blocks and earn rewards. This, however, needed high computational power and consumed a lot of needless energy.

Enter Proof of Stake (PoS)

Proof of Stake (PoS) was first introduced formally as a solution to Proof of Work’s (PoW) high energy consumption problem. This was presented in an August 2012 paper by Sunny King and Scott Nadal who proposed an alternative mechanism referred to as “staking”. According to them, the choice of nodes would depend on the number of tokens any participant has. This implies that stakers (now referred to as validators) could stake more tokens to add blocks to the chain and reap the reward.

This staking approach forms the basis of the PoS consensus mechanism and was first implemented in a peer-to-peer cryptocurrency known as Peercoin.

Today, PoS offers other variations, one of which is the Delegated Proof of Stake (DPoS) from which the word delegation comes.

After the introduction of PoS in 2012, it became evident that other consensus mechanisms could exist. Especially since PoS, despite its apparent benefits over PoW, wasn’t without its flaws. Most notably is the fact that wealthy stakers had an advantage since rewards were handed out based on how much is staked.

Nevertheless, this was addressed by Daniel Larimer in July 2014 when he implemented an improvement on PoS through the Delegated Proof of Stake (DPoS) consensus mechanism.

DPoS is a mechanism that allows participants to delegate the role of validation to another node. It has a similar approach to PoS but here, only chosen delegates participate in staking. The remaining participants can join indirectly by contributing to the staking pool of their preferred delegates which offers several advantages over the PoS approach.

Participants don’t have to assume any responsibility they would normally have resumed if they were the validators themselves. This means that if any participant doesn’t have the time or resources to stake, they can simply delegate the responsibilities to another.

The delegation approach also addresses and reduces the advantage problem for wealthy participants that is apparent under PoS. Anyone, no matter the value being held, can stake their tokens indirectly. Then, the block rewards are shared according to each user’s stake.

Laimer, former Chief Technology Officer of EOS, first implemented DPoS on BitShares in 2015. Since then, other blockchains such as EOS and Lisk use it.

New to trading? Try crypto trading bots or copy trading