Proof of Stake

Proof of Stake is a consensus mechanism in which validators are selected to propose and confirm blocks based on the amount of cryptocurrency they lock up, or “stake,” as collateral rather than on computing power.

How it works

Validators deposit a minimum amount of the network’s token into a staking contract. The protocol then pseudo-randomly chooses who proposes the next block, weighting selection by stake size and other factors. Honest behaviour earns staking rewards; provably dishonest behaviour can have part of the stake “slashed,” giving validators a direct financial reason to follow the rules.

Why it matters

Because it replaces electricity-intensive mining with economic collateral, Proof of Stake uses a tiny fraction of the energy of proof of work. It also lowers the hardware barrier to participation. Critics note it can concentrate influence among the largest stakeholders, which networks counter with delegation and validator limits.

Example

Ethereum moved from Proof of Work to Proof of Stake in 2022. Cardano, Solana and Avalanche are also stake-based networks.