Proof-of-stake (PoS) is also a consensus mechanism like PoW but it’s designed to eliminate the inefficiencies of the PoW mechanism. This mechanism provides better transaction speed while reducing the transaction fee.
In this method, the validators are required to stake the native tokens of the blockchain network where they want to participate in the transaction validation process. Unlike PoW miners, PoS validators don’t need to install any expensive equipment. They can simply start earning rewards by staking the crypto (cardano cryptocurrency) tokens they own.
But it’s important to know that the validator may lose some of his/her holdings if they verified a bad transaction.
How Does Proof-of-stake work?
In the PoS network, the participants are randomly selected to validate the transaction. The participants need to freeze their coins in a specific wallet if they want to participate in the validation process. The participant, who has staked more coins, is given the priority to validate the transaction to generate new blocks.
It doesn’t mean that only one person validates the transaction. The system takes confirmation from multiple participants to ensure that the transactions meet the standards of the network. The validators then receive rewards for validating these transactions. The participant, who has staked more coins, is eligible for higher rewards compared to others.
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