What is Proof of Stake? All You Need To Know

Binance- Binance is a popular platform for exchanging cryptocurrencies. In terms of trading volume, it dominated the cryptocurrency world. To know more about Binance and how it works, kindly read our other blogs.

What is Proof of Stake?

Proof of Stake (PoS) is another variety of algorithms or can be coined as a proof of stake blockchain algorithm that allows its selective validators to mint/forge block transactions depending on the entire amount of coins he/she holds.

A block can actually store a maximum capacity of 1- megabyte transaction data and then it can be copied as nodes or on various computers on the network.

The stake is a common word for stock owned by an investor. The percentage of stock you own in a company is represented by your Stake.

Blockchain is best described as an assemblage of records of all your bitcoin transactions that are linked with each other.

Individual data called blocks are stored digitally in a ledger or spreadsheet, which is known as Blockchain. In this context, the word “block” means “digital information” and “chain” which is a public database where these blocks are stored.

Information like your transaction date, time, and the number of bitcoins you have purchased are recorded as Blocks. They are highly encrypted and make it harder for a hacker to steal any data. 

Features of Proof Stake (Pos):-

1. Proof of Stake (PoS) helps bitcoin miners to mine or validate block transactions based on how many bitcoins a miner has in his hold. 
2. PoS is an alternative to the original algorithm consensus in blockchain technology – Proof of Work (PoW). 
3. PoS network only circulates a stable number of coins. No new coin can exist in this system. 
4. There is always a portion of the fee charged for each transaction. Later this is collected and given to an individual who forges an up-to-date block. The point to be noted this is only rewarded for all legitimate forged blocks. Also, the validator loses his/her stakes which is termed slashing. Unlike Proof of Work (PoW), PoS nodes save a lot of energy by not participating in competing with each other in attaching a new block to the blockchain. 
5. A group of validator candidates has more chances of becoming validates if they combine owning a significant share of total cryptocurrency. This will lead to more and more receiving forging rewards, eventually owning a huge currency share. 
6. Buying more and more coins becomes expensive which might not yield much profit.
7. PoS is highly encoded. Even if anyone wishes to attack the network he/she must hold 51% of the stakes which is quite expensive.

Proof of Stake Coins

Proof of Stake is more of a passive way of income generation and more favorable to the environment speaking from an electrical perspective. 

Proof of Stake (PoS) coins are a type of crypto token that uses staking as its dealings validation operation. Coin holders are rewarded in exchange for tying up a considerable amount of their coins for performing necessary actions on the blockchain.

So the number of stakers can keep their ownership relatively decentralized which contributes to blockchain security. Small coin holders get incentives for hanging on to their coins instead of wagering their way in the open market. 

Now let’s look at all the coins.

Tezos – Tezos is the first on the list of best PoS coins having a 6% yearly interest rate. This blockchain platform is quite similar to Ethereum. Nearly $232 million XTZ tokens are invested by investors making it the biggest ICOs of all time. 

Dash – This is the second-best PoS coin focusing on fast and private transactions. It has a 6.5% yearly interest rate as a reward. It is widely spread among thousands of locations where you can spend Dash. You only need to stake some Dash as collateral. 

Tron – Tron or TRX rewards you with a 4% yearly reward interest rate. It keeps on growing in Tron Dapps, its decentralized applications accounting for nearly 30% of all network traffic. 

Neo – Neo has a 2% yearly interest rate or reward. It may not pay much like the other proof of stake coins, still beats a lot of Old Finance (OldFi) investments, making them valuable in the future. 

Cosmos – Like Tezos, Cosmos is another most popular staking coin. It aims towards becoming an “Internet of Blockchains” by connecting every different blockchain found in the network. Right now, more than 100 different companies use Cosmos for building their own projects. Its rewards are high like 8% which is surely going to be more valuable in the future market since the Cosmos ecosystem is growing bit by bit.  

Vechain (Vet) – Vechain’s staking rewards are as low as 1.5% yearly interest but staking vet is actually easy. You just need a wallet supporting Vechain and some Vet and you are good to go. 

Ontology (ONT) – Ontology specializes security of identity and integrity of data and this ontology is powered by the cryptocurrency Ontology (ONT). Its target market includes businesses that can enjoy blockchain benefits like smart contracts at the same time having total control over sensitive data. These businesses can also set up their own blockchains with their own rules and regulations. It pays about 3.5% yearly. 

So these are all the list of proof of stake coins for your passive and effortless income.  

In a Blockchain network, the original consensus algorithm was Proof of Work (PoW). Power of Work Blockchain is a decentralized ledger that gathers all the transactions into blocks, for enabling network security, Pow was a necessity to prevent fraud.

This security sees that independent data processors who are generally known as miners cannot lie about their transactions (mining) and can produce new secured blocks to the chain.

This consensus algorithm is used by Bitcoin. It was formed to provide solutions for complex mathematical puzzles. 

Due to the huge expenditure and energy consumed for running complicated algorithms by specialized computer hardware, a new consensus algorithm was introduced in 2011 in the Bitcointalk forum. 

Blockchain using Proof of Stake (PoS):- 

1. Peercoin – this is the first cryptocurrency that adopted the PoS method that came into existence in 2012 making it the pioneer blockchain
2. Ethereum – market evaluation specializes Ethereum being the second-largest cryptocurrency platform after Bitcoin.
3. Nxt – another open-source payment network that uses PoS for transactions but no mining.