What is Proof-of-Stake (PoS)?

How Proof-of-Stake Works

• Staking: Users lock up a certain amount of their tokens in the network. These users are called validators.
• Block Production: Validators are chosen to propose and validate new blocks based on the amount of tokens they have staked and, in some systems, other factors like randomization.
• Rewards and Penalties: Honest validators receive rewards (such as transaction fees or new tokens), while dishonest or malicious actors risk losing their staked tokens as a penalty.
• Security: The system is designed so that attacking the network would require controlling a large portion of the total staked tokens, making attacks costly and impractical123.

Key Features

• Energy Efficiency: PoS consumes significantly less energy than PoW, as it does not require massive computational power3.
• Decentralization: Token holders collectively govern the network, and many PoS systems allow anyone with a minimum stake to participate as a validator14.
• Variations: There are several PoS variants, such as Delegated Proof-of-Stake (DPoS) and Leased Proof-of-Stake (LPoS), which introduce different mechanisms for selecting validators and distributing rewards56.

Example: Ethereum's PoS

• Users submit transactions, which are collected in mempools.
• Validators are selected to propose and validate blocks.
• The network reaches consensus and adds new blocks to the chain, with rewards distributed to honest validators21.

Security Thresholds

• Liveness and Finality: Typically require less than 33.3% of malicious or failing stake to maintain progress and irreversibility.
• Safety: Requires less than 66.6% of malicious stake to prevent double-spending or forks8.

Summary Table