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Definition:

Proof of Stake (PoS) is a consensus mechanism used to validate transactions and create new blocks on a blockchain. Instead of using computational power to solve complex mathematical equations like in Proof of Work (PoW), validators are chosen to create new blocks based on the amount of cryptocurrency they hold and are willing to “stake” as collateral. Because PoS does not require as much computational power as PoW, it is considered more energy-efficient.

Examples:

  • Ethereum has shift from its Proof of Work consensus mechanism to Proof of Stake.
  • Some cryptocurrencies such as Tezos, have been using PoS as their consensus mechanism since their launch.

FAQs:

How does Proof of Stake work?

In PoS, validators are chosen to create new blocks based on the amount of cryptocurrency they hold and are willing to “stake” as collateral. The validators will validate the transactions and will be rewarded for it.

How is PoS different from PoW?

PoS does not require computational power to validate transactions, instead it relies on the validators’ stake of the cryptocurrency. PoW requires computational power to validate transactions and solve complex mathematical problems.

Why is PoS considered more energy efficient?

PoS does not require as much computational power as PoW, therefore it does not require as much energy to validate transactions. PoS also can also have more fine-grained control over the block creation rate, which can lead to more energy efficiency.

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