in short
Proof of Stake is a consensus mechanism, which ensures that only legitimate transactions are added to blocks. It works by having authenticators lock down their encryption to protect the network.
Mining as a Bitcoin It is a labor intensive business. But it doesn't have to be.
Bitcoin, and others like Dogecoin And LitecoinProtect your network using Proof of work (PoW) consensus mechanism.
An alternative consensus method used as cryptocurrencies Ethereum It's called proof-of-stake (PoS), which greatly reduces the blockchain's carbon footprint.
In this article, we will examine what consensus mechanisms are and how proof of stake differs from proof of work.
What is the consensus mechanism?
public blockchainsAt their most basic level, they are just databases.
Most databases set permissions on who can access and edit them. This centralized control is convenient, but it makes them vulnerable to hacking. In contrast, blockchains make everyone responsible for updating the software – from the exchanges to the basement traders.
That's a messy process, which is why blockchains use “consensus mechanisms” or “consensus algorithms.” Consensus mechanisms keep the network scalable by ensuring that only legitimate transactions are added to blocks. They're all nodes—or computers running blockchain software—checking each other to conclude, “Yes, this is real.”
By doing this, they are protected from “51% attacks”, which is when someone accumulates more than half of the computing power in a distributed network and can then control it.
What is employment verification?
To prevent attacks that allow you to withdraw funds twice, Bitcoin uses a proof-of-work algorithm. That system requires people to use hardware (and electricity) to help the network process transactions. In Proof of Work, miners (or computers to be exact) try to solve very difficult puzzles to be the first to complete transactions. Their work helps ensure that the transactions are legitimate. As compensation, they are rewarded with cryptocurrencies such as Bitcoin.
Proof of work is built into Bitcoin's design, and has been replicated in other cryptocurrencies, including Ethereum. But one of the byproducts of this system is that solving complex problems requires many machines, using a lot of electricity, and most of the work is wasted except for the energy expended by the winning miner.
What is stock confirmation?
Proof-of-stake aims to achieve the same result as proof-of-work: secure transactions on the blockchain.
While PoW miners devote hardware resources (large, expensive computers) to securing the network, PoW “verifiers” determine their encryption. With PoS, verifiers must lock or bind a cryptocurrency that cannot be spent in order to verify transactions in a block and have a chance to earn the associated fees. Blockchain uses that locked crypto to secure the network.
According to the Ethereum Foundation, Proof of Stake has several advantages over Proof of Work.
🖥️ Earning rewards isn't dependent on having the most computing power, so you don't need the most fancy hardware. 🔌 Due to lower hardware requirements, proof-of-stake uses much less energy than proof-of-work. 👨💻 More people can participate to run a PoS node which is more decentralized and 51% attack resistant.
Starting with the “merger” in September 2022, Ethereum has switched from a proof-of-work consensus system to a proof-of-stake.
Did you know this?
To become an Ethereum validator, you need to pay 32 ETH.
How does the network choose?
Validators on a proof-of-stake network like Ethereum are randomly selected by the network to issue new blocks.
They are also randomly assigned to nodes' committees, which change daily. Every time a new block of transactions is created and added to the blockchain database, the PoS consensus mechanism elects several committees to “verify” that the proposed block is correct.
Validators receive rewards for creating blocks and witnessing other blocks being created. Authenticators will receive a penalty if they are offline or do not provide valid authentication. If they try to attack the network, they can lose their entire share.
The algorithm is designed to make a statistically unreachable attack on the network. According to ConsenSys (which is an editorially independent crypto investor), “there is less than a 1-in-a-trillion chance for an attacker who controls 1/3 of the validators on the network to successfully carry out the attack.”
Damage proof future
Ethereum is not the first cryptocurrency to use proof of stake.
Algorand, Cardano, Cosmos, EOS, SpottedAnd These All have implemented the stock verification version.
Since Ethereum has been converted to proof of stake, the amount of ETH paid has steadily increased. In the year As of January 2024, a quarter of the total supply will be more than 29 million, according to Dune's analysis.
Some worry that proof-of-stake could lead to the centralization of blockchain networks, but staking has emerged as a regulatory point in the US, where the Securities and Exchange Commission has ruled that underwriting services offered by crypto exchanges constitute unregistered securities offerings.
Meanwhile, environmental campaign groups such as Greenpeace have pushed for Bitcoin to be converted to proof of stake. However, it is unlikely that the Bitcoin network will do so, given its ideological attachment to proof-of-work as a decentralization tool. To date, the community of Bitcoin miners and developers has rejected changes to the system designed by Satoshi Nakamoto.
Stay on top of crypto news, get daily updates in your inbox.
