What is Proof of Stake (POS)?

The Proof of Stake consensus mechanism was created by Sunny King and Scott Nadal in 2012. The second most popular cryptocurrency ‘Ethereum’ is attempting to provide a hard-fork from updating its network to proof of stake mechanism. To answer what is pos, we must first know why there was a need for POS. Proof of Stake attempts in optimising most of the major limitations found in the Proof of Work mechanism. POS doesn’t require heavy machinery to create and validate blocks. POS is considered eco-friendly as its energy consumption is much less than that of POW consensus. For this reason, the coins that use the POS consensus are considered ‘Green Coins.’ POS also gave rise to staking in crypto where one can stake or delegate a coin to gain rights to validation and governance on the network. 


The nodes responsible for creating, adding and validating blocks on the network are called ‘Stakers’ within the network. 

  • The 51% attack is made impossible with this consensus mechanism, as it is expensive and comparatively impossible to acquire 51% stakes of a cryptocurrency. Some networks also lay a limitation on the coins to be staked.
  • The energy consumption is also minimized to a greater extent, as POS nodes needn’t be heavy machinery (e.g. today’s Bitcoin miners), making it eco-friendly. You can set up a node on a POS network with just your PC. 
  • This mechanism is also cost-efficient as the hardware requirements are reduced, thus making it more user-friendly and easily accessible. 
  • There are no entry barriers in terms of hardware setup and maintenance for proof of stake coins.
  • The best crypto for staking in POS is the coin that offers sustainable incentives as rewards.


Proof of Work vs Proof of Stake

Category  POW POS
General The nodes that are responsible for creating, adding, and verifying a block are called ‘Miners’. The nodes that are responsible for creating, adding, and verifying a block are called ‘Stakers’
Power  Power over the network depends upon the no. of nodes that a person can control. Power over the network depends upon the amount of stake a person holds on.
Energy consumption  Energy consumption is high in this mechanism. Energy consumption is low in this mechanism.
Efficiency  The transaction speed is quite slow when compared to the PoS mechanism.  The transaction speed is quite fast when compared to the PoW mechanism. 
Cost efficiency  The capital amount involved in setting up the hardware requirements is high, as it requires many distinct hardware components.  Setting up the hardware for this mechanism is cheap, as it doesn’t require any distinct hardware components like POW.
Scalability  As the network grows in size and adoption, the hardware requirements increase while the network capacity decreases.  As the network grows in size and adoption, the hardware requirements remain the same while the network capacity increases. 
Security Many POW chains have suffered 51% attacks in their initial stages. The 51% attack is practically impossible economically, thus making this mechanism more safe and secure.

Both the POW and POS networks support masternodes. The Beldex network currently has the POW + MN architecture. It will soon upgrade to full POS + MN architecture to enhance the network’s scalability and privacy.

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