What is the Proof of Stake Consensus Mechanism?

June 05, 2024

Overview

Proof-of-Stake (PoS) offers energy efficiency and scalability but faces centralization and initial distribution challenges.

2 min. read

2 min. read

2 min. read

Today we continue to build on the topic of the blockchain consensus mechanisms and we will explore Proof-of-Stake (PoS) in depth. 

In PoS token owners stake their crypto within a blockchain, meaning, they lock their crypto assets for a set period to help support the operation of a blockchain. Users who stake their tokens secure the network and will get slashed if they behave maliciously, thus being incentivized to always be honest.

Pros:

  1. Energy Efficiency: PoS consumes significantly less energy compared to PoW, making it more environmentally friendly.

  2. Scalability: PoS can handle more transactions per second, making it more scalable.

Cons:

  1. Centralization Risk: Large stakeholders can potentially have more influence, leading to centralization concerns.

  2. Initial Distribution: The system can be biased towards those who already hold large amounts of the cryptocurrency, leading to wealth concentration.

Disclaimer: The information provided in this research paper is for educational and informational purposes only. It does not constitute financial advice, investment guidance, or any solicitation to buy or sell financial instruments. The views expressed herein are those of the authors and do not necessarily reflect the opinions of Kollectiv.

2024