Proof of stake(PoS) system is slowly making its way to reach at the top position as it is just after Proof of Work (PoW) which is currently the most popular and most used blockchain consensus algorithm.  Proof of stake is now the major point to talk for many blockchain users as it is gradually increasing in popularity and being adopted by several cryptocurrencies. It was first suggested in 2011 in a forum post and in 2012 was adopted by Peercoin which was the first digital currency to make use of this algorithm. Despite the initial popularity of proof-of-work systems that focus on using computation power to secure the network, proof of stake is proving to be a tough competition for the much older and widely used blockchain consensus algorithm.

PoS and PoW share a lot of similarities, but these two also have some differences in their fundamental ways. The main goal for any blockchain based consensus algorithm is to be able to achieve distributed census and also to create a system which is secure for users to be motivated to validate the transactions of other people while complete integrity is maintained.  PoW is used by the most popular and used cryptocurrency Bitcoin, and several other cryptocurrencies used by the likes of Bitcoin and Ethereum (for now) and several other cryptocurrencies. As settled and strong as PoW is, it has its own shortcomings which is where PoS is having an upper hand and taking advantage.

Let's get in deep with what PoS is all about and start from the base.

What is stake?

Stake generally refers to something which is of value or money that’s gambled to make potential gains at the end of a venture. In crypto-terms, stake in PoS is the cryptocurrency which is owned by a user and is pledged so they can take part in validation.

How does PoS work?

  • In PoS the forger is a miner of a new block who is chosen in a two-part semi-random process. The user’s stake is the first thing which is considered during the selection process.
  • Stakes are supposed to be owned by every validator using the network, the staking process involves making deposits of the amount of tokens into the system and then locking it to virtual safe.  It is then used as collateral in order to ensure the legitimacy of the block.
  • It is simple if you want to create your chances of being selected you have to stake in more, trying to act in any manner that seems misleading can see a user endure major setback compared to someone with less stakes.  


The key in the first part of PoS is to include more chance or luck in the selection process so as to avoid a situation where the richest users are the ones constantly selected to be the ones to validate transactions, benefit from all the rewards and continue to grow richer can be avoided. As much as it seems like PoS is more suitable for wealthy users it isn't the real case.

The second element of the PoS involves adding the random to the semi-random during the selection process, the way it is done is different from one blockchain to another.  The most common methods which are used are coinage selection and randomized block selection.

The Randomized Block Selection process involves forgers being selected with the combination of the highest stakes and the lowest stakes.

Here are some reasons why PoS is making major headlines

PoS is considered as one of the best options for cryptocurrency consensus algorithms for several reasons which include,


PoS provides tight security for all its users as attackers have to put their assets and stakes on the line before they can be able even to attempt a 51% attack.  This greatly discourages attackers from making any attempts compared to PoW where attackers won't lose any of their hardware when trying an attempt of 51% attacks on their system.


There's decentralization of power in the PoS system which means many investors stand a chance. Large mining pools ( when miners combine their available resources) have the ability to be in control of more than 51% of networks which run the PoW system which leads to a big threat of centralization happening.  This is because there's an increase in reward per investment in the PoW systems whereas on the PoS systems a user who invests twice or more times compared to other users will have twice as much control compared to the PoW systems which will give the enormous user control.

Energy Efficiency

When compared to PoW, PoS algorithms are much more energy efficient, PoS is a more efficient option when it comes to cutting out the usage of energy that comes with the intensive mining process. This is one of the reasons why more cryptocurrencies are migrating to the PoS system like Ethereum which is the second most used cryptocurrency.

No need to issue many new coins

Thanks to the lack of high electricity usage, there's not much need for many coins to be issued so participants can be motivated to continue participating in the network. There's even the possibility to have negative bet issuance theoretically, a portion of the transaction fees will be burned which will make the supply to reduce over time.

Both PoW and PoS remain the dominant two most common blockchain consensus approaches. Others exist but have not yet made any impact like the PoW and PoS.  With the way PoS is appreciated and being adopted by cryptocurrency, it will probably end up taking first place from PoW soon.

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