The Different Forms of Proof of Stake (PoS)
Many people do not realize that there are various forms of Proof of Stake (PoS). This method is an alternative to the Proof of Work (PoW) system for validating transactions on blockchain. The PoW system, used by Bitcoin’s blockchain, is considered slow and costly.
The Proof of Stake (PoS)-based consensus mechanism
To address this, the PoS method was invented to speed up and make transaction validation on blockchain less energy-intensive. Unlike PoW, PoS does not require miners to perform work, eliminating the need for miners altogether. Instead, validators stake their cryptocurrencies, increasing their chances of generating a block and receiving rewards for validating transactions.
Staking on nodes
PoS-based networks work best when holders of the network’s native cryptocurrency stake many of their coins. For instance, on Ethereum, over 28 million ETH, out of about 120 million existing ETH worldwide, are staked. However, running an Ethereum validator node requires 32 ETH to be staked, making it expensive and impractical for small ETH holders.
Leased Proof-of-Stake (LPoS)
Private initiatives offer traditional PoS networks the LPoS system, which allows third parties to lend their coins to validator nodes, increasing the likelihood of generating blocks and getting rewarded. This decentralized system offers an alternative for users who do not have enough coins to operate their own node, enabling them to participate in the staking process.
Delegated Proof of Stake (DPoS)
DPoS, the third variant of PoS, utilizes a system of representative democracy to select validator nodes through elections. This reduces the number of validators, facilitating faster consensus and lower transaction fees. For example, the Tron network, based on DPoS, has significantly lower transaction fees compared to Ethereum, making it a preferred choice for some transactions.
Hot Take
Overall, there are several variations of Proof of Stake (PoS) that provide distinct advantages to the users, including reduced energy consumption, lower transaction fees, and increased staking accessibility for a wider range of participants.
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