Proof of Stake, Simply Explained 21 March 2018

The proof of stake was created as an alternative to the proof of work (PoW) concept, to tackle inherent issues in the latter. Currently, only altcoins use the proof of stake concept. When a transaction is initiated, the transaction data is fitted into a block with a maximum capacity of 1 megabyte, and then duplicated across multiple computers or nodes on the network. The nodes are the administrative body of the blockchain and verify the legitimacy of the transactions in each block.

To carry out the verification step, the nodes or miners would need to solve a computational puzzle, known as the proof of work problem. The first miner to decrypt each block transaction problem gets rewarded with a coin. Once a block of transactions has been verified, it is added to the blockchain, a public transparent ledger. (

Proof-of-stake comes with a number of improvements to the proof-of-work system:

  • better energy efficiency – you don’t need to use lots of energy mining blocks
  • lower barriers to entry, reduced hardware requirements – you don’t need elite hardware to stand a chance of creating new blocks
  • stronger immunity to centralization – proof-of-stake should lead to more nodes in the network
  • stronger support for shard chains – a key upgrade in scaling the Ethereum network(

Currently on Proof of Work blockchains, we’re able to process somewhere between 50 and 20 transactions worldwide per second,which may sound like a lot until you realize that modern payment processing networks like Visa can scale up to over 70,000 transactions a second. (LinuxFoundationX LFS170xBlockchain: Understanding Its Uses and Implications)

Proof of Stake Example ETHEREUM

Proof-of-stake is the underlying mechanism that activates validators upon receipt of enough stake. For Ethereum, users will need to stake 32 ETH to become a validator. Validators are chosen at random to create blocks and are responsible for checking and confirming blocks they don’t create. A user’s stake is also used as a way to incentivise good validator behavior. For example, a user can lose a portion of their stake for things like going offline (failing to validate) or their entire stake for deliberate collusion.


Unlike proof-of-work, validators don’t need to use significant amounts of computational power because they’re selected at random and aren’t competing. They don’t need to mine blocks; they just need to create blocks when chosen and validate proposed blocks when they’re not. This validation is known as attesting. You can think of attesting as saying “this block looks good to me.” Validators get rewards for proposing new blocks and for attesting to ones they’ve seen.

If you attest to malicious blocks, you lose your stake.(

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