Castore  DeRose

Castore DeRose

1640362500

What is Proof of Stake (PoS) in Cryptocurrencies | For Beginners

In this post, you'll learn What is Proof of Stake (PoS) in Cryptocurrencies?

Since cryptocurrencies are decentralized and not under the control of financial institutions, they need a way to verify transactions. One method many cryptos use is proof of stake (PoS).

Proof of stake is a type of consensus mechanism used to validate cryptocurrency transactions. With this system, owners of the cryptocurrency can stake their coins, which gives them the right to check new blocks of transactions and add them to the blockchain.

This method is an alternative to proof of work, the first consensus mechanism developed for cryptocurrencies. Since proof of stake is much more energy-efficient, it has gotten more popular as attention has turned to how crypto mining affects the planet.

Understanding proof of stake is important for those investing in cryptocurrency. Here's a guide to how it works, its pros and cons, and examples of cryptocurrencies that use it.

How does it work?

The Proof Of Stake algorithm uses a pseudo-random election process to select a node to be the validator of the next block, based on a combination of factors that could include the staking age, randomization, and the node’s wealth.

It’s good to note that in Proof of Stake systems, blocks are said to be ‘forged’ rather than mined. Cryptocurrencies using Proof of Stake often start by selling pre-mined coins or they launch with the Proof of Work algorithm and later switch over to Proof of Stake.

Where in Proof of Work-based systems more and more cryptocurrency is created as rewards for miners, the Proof-of-Stake system usually uses transaction fees as a reward.

Users who want to participate in the forging process, are required to lock a certain amount of coins into the network as their stake. The size of the stake determines the chances for a node to be selected as the next validator to forge the next block - the bigger the stake, the bigger the chances. In order for the process not to favor only the wealthiest nodes in the network, more unique methods are added into the selection process. The two most commonly used methods are ‘Randomized Block Selection’ and ‘Coin Age Selection’.

In the Randomized Block Selection method the validators are selected by looking for nodes with a combination of the lowest hash value and the highest stake and since the size of stakes are public, the next forger can usually be predicted by other nodes.

The Coin Age Selection method chooses nodes based on how long their tokens have been staked for. Coin age is calculated by multiplying the number of days the coins have been held as stake by the number of coins that are staked. Once a node has forged a block, their coin age is reset to zero and they must wait a certain period of time to be able to forge another block - this prevents large stake nodes from dominating the blockchain.

Each cryptocurrency using Proof of Stake algorithm has their own set of rules and methods combined for what they think is the best possible combination for them and their users.

When a node gets chosen to forge the next block, it will check if the transactions in the block are valid, signs the block and adds it to the blockchain. As a reward, the node receives the transaction fees that are associated with the transactions in the block.

If a node wants to stop being a forger, its stake along with the earned rewards will be released after a certain period of time, giving the network time to verify that there are no fraudulent blocks added to the blockchain by the node.

Mining power in proof of stake

Mining power in proof of stake depends on the amount of coins a validator is staking. Participants who stake more coins are more likely to be chosen to add new blocks.

Each proof-of-stake protocol works differently in how it chooses validators. There's usually an element of randomization involved, and the selection process can also depend on other factors such as how long validators have been staking their coins.

Although anyone staking crypto could be chosen as a validator, the odds are very low if you're staking a comparatively small amount. If your coins make up 0.001% of the total amount that has been staked, then your likelihood of being chosen as a validator would be about 0.001%.

That's why most participants join staking pools. The staking pool's owner sets up the validator node, and a group of people pool their coins together for a better chance of winning new blocks. Rewards are split among the pool's participants. The pool owner may also take a small fee.

Security

The stake works as a financial motivator for the forger node not to validate or create fraudulent transactions. If the network detects a fraudulent transaction, the forger node will lose a part of its stake and its right to participate as a forger in the future. So as long as the stake is higher than the reward, the validator would lose more coins than it would gain in case of attempting fraud.

In order to effectively control the network and approve fraudulent transactions, a node would have to own a majority stake in the network, also known as the 51% attack. Depending on the value of a cryptocurrency, this would be very impractical as in order to gain control of the network you would need to acquire 51% of the circulating supply.

The main advantages of the Proof of Stake algorithm are energy efficiency and security.
A greater number of users are encouraged to run nodes since it’s easy and affordable. This along with the randomization process also makes the network more decentralized, since mining pools are no longer needed to mine the blocks. And since there is less of a need to release many new coins for a reward, this helps the price of a particular coin stay more stable.

It’s good to remember that the cryptocurrency industry is rapidly changing and evolving and there are also several other algorithms and methods being developed and experimented with.

#blockchain #bitcoin #cryptocurrency 

What is GEEK

Buddha Community

What is Proof of Stake (PoS) in Cryptocurrencies | For Beginners
Abigail betty

Abigail betty

1624320000

What is Proof of Stake? - Earn Passive Income with Staking. DO NOT MISS!!!

Content of this video:
0:58 Decentralized Cryptocurrencies
1:14 Bitcoin Mining
1:47 Proof of Work
2:31 Proof of Stake
2:50 How Does Staking Work?
3:47 Ethereum’s Blockchain
4:06 How to Stake Ethereum
4:48 Ethereum Staking Rewards
5:42 Staking Limitations
6:44 Staking on Exchanges
7:13 Staking Pools
7:47 Validator as a Service
8:12 Conclusion on Cryptocurrency Staking
9:00 Bloopers :)
📺 The video in this post was made by 99Bitcoins
The origin of the article: https://www.youtube.com/watch?v=0RhJBZGnOLQ
🔺 DISCLAIMER: The article is for information sharing. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Not investment advice or legal advice.
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#bitcoin #blockchain #proof of stake #what is proof of stake #earn passive income with staking #what is proof of stake? - earn passive income with staking

Angelina roda

Angelina roda

1624233600

The BEST 5 Cryptocurrency Tips for Beginners (2021). DO NOT MISS!!!

The BEST 5 Cryptocurrency Tips for Beginners (2021)
📺 The video in this post was made by More LimSanity
The origin of the article: https://www.youtube.com/watch?v=BXbYwSpcIjw
🔺 DISCLAIMER: The article is for information sharing. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Not investment advice or legal advice.
Cryptocurrency trading is VERY risky. Make sure you understand these risks and that you are responsible for what you do with your money
🔥 If you’re a beginner. I believe the article below will be useful to you ☞ What You Should Know Before Investing in Cryptocurrency - For Beginner
⭐ ⭐ ⭐The project is of interest to the community. Join to Get free ‘GEEK coin’ (GEEKCASH coin)!
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Giles  Goodwin

Giles Goodwin

1599018060

WTF is Exchange Staking? | Hacker Noon

Introduction

Mining and trading used to be the most popular ways to make money on the cryptocurrency. Staking, a much simpler alternative, is gaining massive popularity. In this case, the user does not need to deal with the technical difficulties of mining or learn the intricacies of trading.

Staking is the process of actively participating in transaction validation in a proof-of-stake (PoS) mining algorithm and its variations. For the first time, this algorithm was implemented in 2012 in the Peercoin project. It was proposed as an alternative to Proof-of-Work (PoW) to reduce the probability of centralization of mining and reduce electricity costs for it.

Current Value in Staking by Asset (source)

Nowadays, PoS and its variations are used by dozens of cryptocurrencies: EOS, Tezos, Dash, Stellar, NEO, NEM, Cosmos, Lisk, Waves, OmiseGo, etc. Ethereum and Cardano will join them soon, which may attract massive attention to this segment of the cryptocurrency market.

Exchange Staking

Initially, the entire staking services were on specialized platforms such as Stake.Fish and Stake Capital. However, over the past two years, staking as a form of earning money on cryptocurrency began to gain popularity, as exchanges and wallets began to offer it.

As a result, major exchanges have already become leading nodes for some digital assets, f.e. Coinbase is among the largest validators of the Tezos network; Huobi is one of the Chainlink’s validators.

The whole range of crypto exchanges became staking providers: Binance, Kucoin, OKEx, Hotbit, Bithumb, Coinbase, Kraken, avnd others. This broad interest in the new product is easy to explain. Staking is profitable for both stock exchanges and crypto investors. At the same time, PoS projects are quite well known on the market and have already proved their trustworthiness, while exchanges can offer more liquidity than pools.

Also, staking is convenient for end-users. UX of many solutions in the crypto is quite complicated. But to make money on staking on a cryptocurrency exchange, you need just to buy the necessary amount of a specific currency and store it for a certain amount of time.

_Top exchange staking providers by _stakingrewards.com

Most likely, in the nearest future, the exchanges will compete for users. As a result, we will get a wide range of offers and conditions of exchange staking. There are some unusual solutions, like Kucoin’s Pool-X, Soft Staking, or Binance’s staking zero fees.

Moreover, I think that staking will soon be a good alternative to the to ICO/IEO. Because a team can sell its tokens since the start of staking on an exchange. Moreover, this fundraising type protects projects from the immediate dump of the price right after the listing. But in my opinion, this type of fundraising will not live long.

#staking #ico #ieo #cryptocurrency #proof-of-stake #pos #blockchain #exchange

Amara Sophi

Amara Sophi

1593680226

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walter geed

1605848956

Best Cryptocurrency Development Company | Cryptocurrency Software Solutions

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