When it comes to choosing a Blockchain infrastructure, it’s of great importance that you evaluate the consensus model it implements. The sanctity of all data recorded on the Blockchain is maintained by the consensus algorithm. Proof of stake is one of the most commonly used algorithms in achieving distributed consensus in cryptocurrency Blockchain networks.
Proof of stake was first described in 2012 by Scott Nadal and Sunny King as a solution to high energy consumption related to mining Bitcoin. At that time, the Bitcoin network used up to electricity amounting $150,000 on daily basis. Today, the Bitcoin’s network consumption is estimated to consume electricity equivalent to that of Ireland.
In a proof of work Blockchain consensus model, miners/validators compete to create the next block in the chain by racing to validate transactions – usually an extremely computation intensive cryptographic puzzle. The first miner to find the solution to the puzzle wins the lottery; the reward is currently 12.5 Bitcoins for the successful miner plus all transaction fees of the transactions included in the block.
However, in proof of stake Blockchain, your chance of emerging as the creator of the next block depends on the amount of coins you hold in the respective system. Case in point, a validator with 1000 coins will be ten times as likely to be chosen that another validator with only 100 coins.
Over the history of cryptocurrency, there have been multiple secure and fully functional PoS iterations – from pure PoS to Delegated PoS to Hybrid PoS-PoW. Each implementation has its own unique strengths and weaknesses. However, the adoption of PoS consensus systems reflects a philosophical move in the cryptocurrency world towards more decentralized and eco-friendly crypto-systems.