Proof of Stake (PoS) is a consensus mechanism used by many blockchain networks as an energy-efficient alternative to Proof of Work. Instead of miners competing with computational power, PoS networks select validators based on the amount of cryptocurrency they have staked (locked up as collateral).
Here is how Proof of Stake works in simple terms:
- Validators deposit a minimum amount of the network's native token as their stake.
- The protocol selects a validator to propose the next block, typically based on the size of their stake and other factors like randomness.
- Other validators verify the block is valid and attest to it.
- The proposer and attestors earn rewards (new tokens and transaction fees).
- If a validator acts maliciously or goes offline, a portion of their stake can be destroyed through slashing.
The most notable blockchain to adopt PoS is Ethereum, which transitioned from Proof of Work in September 2022. Other major PoS networks include Solana, Cardano, Polkadot, and Avalanche.
Advantages of Proof of Stake:
- Energy efficiency – PoS uses a fraction of the energy required by PoW mining.
- Lower barrier to entry – No expensive mining hardware is needed.
- Passive income – Token holders can earn rewards by staking.
To learn how you can start earning staking rewards, read our staking guide.