Proof of Stake (PoS) in Cryptocurrency explained

Proof of Stake (PoS) in Cryptocurrency

Are you just starting to invest in crypto? Have you come across the term Proof of Stake (PoS). To understand what PoS is, you first need to understand the blockchain system behind crypto. Crypto is a digital asset that uses blockchain technology which is a computer network spread throughout the world. In this system, there is a verification system which records every transaction that occurs in the system. It also regulates each issuance of new assets. PoS itself is a procedure used to maintain the security of crypto assets. With the PoS concept, you can mine for coins by validating transactions in the blockchain system based on the number of coins you own. This means that the more coins a user has, the more likely they are to become a validator and a coin miner. 

How Proof of Stake Works

Unlike its predecessor Proof of Work (PoW), the validation system in PoS does not require large amounts of computing power. In addition, the validators are also randomly selected. In the process, miners do not need to mine new blocks themselves, but only need to create blocks when they are selected and validate the existing blocks. Here are some ways this system works:

  • Beacon chain
    In switching the system to the proof of stake method, similar to Ethereum, it is found that there is complexity in the form of tethering of the shard chain. It is a separate blockchain network that requires validators to process all transactions and also create new blocks. All of these shard chains require a common understanding of the state of the network. For this reason, extra coordination is needed by beacon chain miners.
    The beacon chain serves to receive and process status information in the network from shards and connect them with other shards so that synchronization between networks is maintained. Not only that, but the beacon chain will also manage validators, from collecting coin deposits to issuing prizes and penalties.
  • Validation work process
    In this way of working,  the validator will be responsible for processing transactions in fractional blocks. The selection of the validator itself is carried out using an algorithm that has been determined by the beacon chain proposing new blocks.
  • Approval process
    In Proof of Stake, to prove each block of shards, it takes up to 128 validators called committees. In this case, the validators are not selected for the formation of new blocks but are chosen randomly and they are tasked with validating the blocks so that everything runs smoothly. Each validator has a time frame for proposing and validating blocks of shards called ‘slots’. In each of these slots, only one block is considered valid. After each validation period, the committee will be dissolved and re-formed with different validators at random.
  • Finality
    In the Proof of Stake network system, there is what is referred to as ‘finality’ where all validators who are involved in the block validation process are asked to give approval on the block status in the ongoing check. If the ⅔ validator approves it, then the block will be completed. This process aims to further improve network security.

How to Get Profits Through Proof of Stake

One way to participate in the Proof of Stake system is to do crypto staking. Staking itself is a system where someone is involved in the validation process of the blockchain system as described above. If you are interested in staking, you can start on Tokenomy without having to invest in the expensive computers. For Tokenomy’s staking system, you only need to store your crypto assets in Tokenomy’s staking dashboard and wait for your rewards to be awarded to you either on a daily or weekly basis. To get started, you can register and verify your account. Good luck!

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