📌 What is Proof of Stake (PoS)?

Proof of Stake (PoS) concept state thats that a person can mine or validate block transactions according to how many coins he or she holds. This means that the more Bitcoin or altcoin owned by a miner, the more mining power he or she has.

• Key Takeaways

📌 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 nodes 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 cryptocurrencies 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 (투자액). 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.