Crypto gains shared user attention, and you might think of ways to start investing in it as well. The combination of words proof and stake may sound almost like an oxymoron with the first word being associated with something secure and the second one meaning risky venture. In reality, proof of stake crypto might be a much better option. Spoiler: this notion actually means a more secure network than the one based on a proof of work algorithm. Let us explain to you why but, first, we’ll tell you what it means.
Why Cryptocurrency Proof of Stake Will Become the Future of Cryptocurrencies
Cryptocurrency Proof of Stake is a system used to secure blockchain. It enables blockchain to maintain valid and correct information. This algorithm determines the next validator who can add the transaction block to the chain. In the proof of stake system, a validator is a counterpart of a miner in the proof of work algorithm. They are nodes in the network that stake and are chosen by the system to build blocks of transactions depending on the number of tokens they have. The rest of the token holders that don’t get to be validators will be able to entrust their holdings to a validator. This will give them a chance to get a share of a validator’s rewards when they are chosen to make another block of transactions.
Due to the nature of the Proof of Stake systems, they are more energy-efficient than Proof of Work operations. Also, being a lot less expensive compared to a proof-of-work-based model, it opens the door for more people. With cryptocurrency becoming popular, the network is more decentralized and, thus, more secure. Thanks to this model, crypto gains popularity – it has a lower barrier to entry and doesn’t need lots of energy to maintain the processes.
Curious about the Real World Proof-of-Stake?
You may wonder why cryptocurrency proof-of-stake is so popular, so below are several advantages of opting for this model.
- It is energy-efficient. While the proof-of-work algorithm requires costly mining equipment and lots of electricity, all the hardware validators need is equal to a laptop. The software is pretty straightforward as well. Take a look at a proof-of-stake staking coin comparison chart on MyCointainer staking platform to get the most of easy access and
- It takes less time allowing more transactions. Miners compete in solving puzzles, but validators get chosen to find a certain block on the basis of the number of tokens.
- Flexibility and remote possibilities. As a miner, one needs to be physically present in a warehouse full of computers. However, validators can operate global networks sitting in a coffee house or at home.
- More affordable for the newbies. Miners have continuous expenses associated with the energy to power the mining equipment and validators are required to spend money only once to buy the tokens. Without the POS model, it would be impossible for many people to participate.
What is Proof Of Stake? And What Is The Prominent Use Case for POS Coins?
Below we will explain what are the benefits and disadvantages for those investors interested in a POS coin. Despite its time and energy efficiency, flexibility, and affordability, proof of stake has some major drawbacks that can be critical for those who prioritize security and other factors. An understanding of the possible risks will give you a bigger picture of what a POS coin is.
- It’s more susceptible to attacks. Due to the decentralized nature of this model and the increased number of participants, security can decrease. While the POW algorithm with its robust equipment and continuous energy costs makes attacking the network harder, more open POS systems leave more space for fraud.
However, some may claim that this point is not valid for the biggest blockchains – the more popular it is, the harder it becomes to attack it by purchasing tokens.
- Not big enough. POS systems haven’t scaled up to the leading coins like Bitcoin or Ethereum.
- Not as fair as it may seem. The low entry cost allows coin consolidation. While a lot of validators will purchase small amounts of tokens, major validators get the possibility to control the network.
Cardano is a good example of a cryptocurrency using the POS model. Anyone who owns this coin can stake it and set up their own validator node. Go to the MyCointainer website to find Cardano in the proof-of-stake coin comparison chart.