What is Proof of Stake?

Proof of Stake is an idea that suggests that an individual can mine or validate blockchain transactions relative to the proportion of coins such a person has. This means that the mining power of a miner would be dependent on how much the miner has. 

Key Points

  • Using the Proof of Stake allows Bitcoin miners to take advantage of their previous wealth to harness more mining power.
  • Proof of Stake was made as a substitute to Proof of Work which is the authentic algorithm used in blockchain technology for verification.
  • While Proof of Work demands a high supply of energy and sophisticated hardware requirements, thereby leaving the miner to foot exorbitant bills, Proof of Stake gives mining power on the basis of how much coin a miner holds without that miner spending it. 
  •  Proof of Stake reduces the risk for miners to hack the blockchain. Because it gives rewards in such a way that makes it profitable for the miner to hack.

The Concept of Proof of Stake

Proof of Stake was introduced to remedy the challenges posed by Proof of Work.  It’s working procedure is very simple. 

When a transaction starts, the data of that transaction I inputted into a block of 1Megabyte capacity. After that it is spread across multiple nodes. These nodes would need to solve a mathematical puzzle. The first miner who decrypts the puzzle gets rewarded with a coin. Once a block is verified, it will be added to a public ledger. This entire process is what mining entails. To do this miners spend given the amount of energy and hardware resources. This makes them sell their coins which they get as reward in order to foot the cost of this bill. As a result, the value of Bitcoin drops. Because of this, Proof of Stake is a better option since the chances of a miner are increased in ratio to the amount of coin he possesses. This system will ultimately increase the value of Bitcoin.

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