Proof of Stake

Written by Team ETHDOC
Proof of stake is the consensus solution that crypto needs. The proof-of-stake system prevents the printing of extra coins by users, thereby ensuring the integrity of the cryptocurrency. Ethereum, the second most valuable cryptocurrency according to market capitalization, is planning to migrate to Proof of Stake. This will increase scalability and reduce the energy consumption of the network and make the platform more secure. Bitcoin currently uses a different method, known as Proof of Work.

Alternative to Proof of Work, Proof of Stake provides a consensus mechanism. In this case, instead of contributing computing power, users can place their coins at risk. Afterward, the network selects users at random to assist in generating the next block of transactions. As Proof of Stake is decentralized, a blockchain can be updated decentralized without consuming large amounts of electricity or power.

In order to mine cryptocurrencies, huge amounts of electricity are consumed. In recent years people started working on a different technique called Proof of Stake. A secure system does not only use less energy but is also more energy-effective.

Proof of Stake: A Brief History

Proof of Stake was first introduced in 2012 as a solution to the energy consumption of Bitcoin mining by Sunny King and Scott Nadal. When Bitcoin was introduced in 2009, the Bitcoin network cost on average $150,000 per day to maintain. On Oct. 13, 2017, the Bitcoin network consumed approximately 56,209,833 kWh of electricity, which put the current figure at $6.7 million.

As an alternative to mining, Sunny and Scott proposed staking, a method that would determine what nodes to add blocks based on how many coins an individual held. Therefore, stakers that have a greater number of coins in their wallets will have a greater chance of being selected to contribute a block to the chain and reap the reward.  The hope was that it would reduce mining costs and difficulty as energy costs and hash rates continue to rise. Despite its benefits, however, the consensus mechanism did not come without its own weaknesses.

Proof of stake security

In Proof of Stake, the majority of crypto miners are still vulnerable to a 51% attack, however, this attack poses an even greater risk to attackers. 51% of the staked Ethereum must be under your control to accomplish this. That would not only cost an enormous amount of money, but it would possibly cause Ethereum’s value to drop as well.

When you own a majority stake in a currency, there is little incentive to destroy its value. The network is more likely to be secure and healthy if incentives are stronger. The beacon chain will coordinate the punishment of stake slashings, ejections, and other infractions. In addition to tracking these incidents, the validation team is responsible for flagging them.

The Proof of Stake method

The Proof of Stake method is an alternative method for creating blocks on a blockchain instead of Proof of Work. The consensus mechanism will be entirely virtual if proof of stake is provided. However, the process of reaching the end goal is totally different as compared to proof of work. By using their computational resources, the miners of Proof of Work solve cryptographically difficult puzzles.

When Proof of stake is used, the block producers are known as validators instead of miners. In order to participate in the process of block creation, stakeholders must put down a deposit. In exchange for their stake in the ecosystem, the validators lock up some of their Ether. Following that, validators bet on which blocks should be next in line for adding to the chain. A block reward proportionate to the stake is given to the validators if the block is added.

Advantages of Proof of Stake

1. Environment Friendly

In terms of advantages, the environmental-friendly feature is considered to be the most important one, which means that the Blockchain does not consume a lot of electricity to operate, but the other advantages also exist. The low energy consumption makes it unnecessary to compensate network users for creating new tokens.

2. A centralized system reduces risk

In a centralized system, the reward increases proportionally to the number of assets in each custody, thus reducing risks. In other words, users are free to shop for equipment according to their requirements. It has been shown that participation tests have proved to be more effective than the same work test, to discourage the formation of decentralized posters, that is, posters or actors who wish to harm or damage the network.

3. Cryptographic Algorithm

Stakeholders can transfer or sell the collateral in a consensus test participation algorithm as of the present. Proof of Stake is a cryptocurrency with a cryptographic algorithm, in which the stakers obtain profitability based on a fixed percentage, not on the price per coin. Because of this, adoption and security are unrelated.

4. High level of efficiency

Due to the fact that it removes the high-powered computing from the consensus algorithm, proof of stake is more energy efficient. The proof of stake method is similar to the proof of work, but also more complicated and difficult to secure. If the algorithm is not written correctly, adding punishment and collateral creates new variables that need to be tested, creating vulnerabilities.

5. Reduces Energy Consumption

In terms of energy consumption, Bitcoin currently consumes 140TWh per year, while Ethereum consumes 34TWh per year. Miners consume more energy than entire nations, for this reason, mining is unsustainable. Proof of Stake consensus reduces the amount of energy consumed by validators because they don’t have to do complex calculations to verify transactions.


Proof of stake is an innovative new idea that allows common users to earn passive rewards while participating in the security of a specific blockchain. The cryptocurrency is gaining enormous attention with its conversion to Proof of Stake, yet it is still too early to determine how successful this transition will be.

There is serious potential for blockchain-based systems to gain real-world adoption through Proof of Stake consensus. Basically, Proof of Stake reflects a move in the cryptocurrency world towards decentralized and environment-friendly cryptography.