POS (Proof-of-Stake)

Proof of Stake (PoS) and Proof of Work (PoW) are the two most common types of consensus mechanism on the blockchain. PoS came into existence as a solution to the intense energy usage required by PoW. In PoW, you need miners with hardware (HW), while in PoS you use your assets, which are inserted into the staking ecosystem through validators.

PoS today include chains such as Ethereum, Avalanche, NEAR, Algorand, Polkadot, Tezos, etc.

What is PoS?

Proof of Stake (PoS) is an algorithm that works similarly to Proof of Work (PoW) and is used to achieve consensus when verifying transactions on the blockchain. However, PoS changes the means by which blocks are verified .

It has been designed to reduce the energy consumption of network security, thereby saving the environment.

The energy intensity of PoW, on which, for example, Bitcoin runs, annually consumes the same amount of energy as some small countries - the security of the network  is redeemed by the demanding computing power, hence the "proof of work." Using PoS can also help ensure network security, except that investors use their crypto staking to verify transactions. They get rewarded based on a percentage of the amount invested.

Block validation in PoS is handled by the validators, without which the network could not work.

Who is a validator?

Validators verify blocks, blockchain activity, and check transactions. In order to become a validator, you need to stake a certain amount of coins / tokens. For example, to become a validator on the Ethereum blockchain, you need to deposit a minimum of 32 ETH.

PROs

• Low computational / energy consumption compared to PoW
• Transactions are cheaper and faster
• You don't need to own overly powerful HW

CONs

• PoS does not achieve the same security as PoW
• Validators with a large share of TVL can have a large impact on transaction validations
• In the case of staking, it is sometimes necessary to lock the deposited cryptocurrencies for a certain period of time, so they cannot be withdrawn when needed
• If the validator controls more than 51 % of the assets embedded in the staking, there is a theoretical chance of an attack on the entire blockchain. An attacker could invalidate transactions that have already been completed by spoofing them, thereby compromising trust in the whole chain. This would mean a fall in value followed by its gradual extinction. However, this attack would likely be disadvantageous to the attacker as well, coming with all sorts of additional costs in order to occur in the first place.

Even though PoS is older in time than Delegated Proof of Stake (DPoS), this does not mean that we should avoid PoS chains; rather, we should embrace them! The most well-known chains I mentioned in the introduction run on PoS consensus. The Ethereum blockchain is the #1 choice in this case.

Conclusion

Proof of Stake (PoS) is a benefit for cryptocurrencies that use it. The transactions are fast and inexpensive with a low demand on the power grid. PoS is used by a number of major chains and is, in some ways, the opposite of Proof of Work (PoW). In theory, you can also become a validator, get rewards for staking, and you don't have to own overly powerful hardware (and deal with associated maintenance).