What Is Proof of Stake (PoS) in Crypto? Explained



Many popular projects like Bitcoin, Ethereum, and BNB fly to the moon, while others take big hits. The rapid development of blockchain technology attracts many long-term investors and quick moneymakers.

While the rush towards more exchange-listed funds and trusts is increasing, there's also a critical debate on the technical side: Is the future of the crypto world found in the proof of stake mechanism?


The fundamental element of any blockchain network lies in its consensus mechanism throughout its network distribution while confirming the record of transactions.


"Proof of Work" and "Proof of Stake" are the two primary protocols by which cryptocurrencies validate new transactions. After that, the transaction is recorded in the blockchain, generating new tokens.


The Proof of Work (PoW) mechanism requires each node in the network to solve a puzzle. The first node to solve the puzzle gets access to add a new block and miners get tokens as a reward.


In PoW, nodes are the administrative body of the blockchain and validate the legitimacy of the payments. Once the block of transactions has been verified, the data is recorded into the blockchain.


The Proof of Stake (PoS) mechanism was developed to address the issue of scalability and environmental sustainability that were seen in the Proof of Work protocol.


What is Proof-of-Stake?

As you might have understood by the name, the nodes stake an amount of cryptocurrency to get registered to become a validator of the new block and earn the fee from it.


The Proof of Stake mechanism allows a person to mine or validate block transactions based on how many coins the person holds. It simply means that the more coins a miner has, the more mining power the person has.


The PoS system also addresses the issue of security as it structures the reward in such a way that it is less advantageous for the miner. The mining power in the Proof of Stake mechanism is allocated to the number of coins held by a miner.


The Proof of Stake mechanism can be viewed as an improved version of Proof of Work consensus in this way:


  • Energy Efficiency: requires less energy to mine blocks

  • Less Expensive: you don't need expensive hardware to hold a chance to create new blocks

  • More effective resistance to centralization: PoS might lead to more nodes in the network

  • Stronger support for shard chains: PoS could be an important upgrade in scaling the Ethereum network

Thus, instead of using electricity to answer PoW puzzles, a PoS miner is restricted to mining the percentage of transactions based on the user's ownership stake. This way, it is less risky than the Proof of Work system.


The Workflow of the Proof of Stake

  1. Validation: When a transaction is submitted on the network, the randomly selected validator will add it to the block.

  2. Attesting: The remaining validators will authenticate to another validator's proposal, verifying that the transaction is legit.

  3. Slots/Epochs: A slot is the time validators have to validate a block. There is only one block in a slot. Thirty-two slots make an 'Epoc .' At the end of an epoc, a new group of users is made from the next validation epoc. This random and regular selection process increases security, preventing conspiracy and illegal acts.

  4. Crosslinking: Separate chains create a crosslink that confirms that the block and the transaction on that block have been added. The validators are then rewarded for their proposal.

  5. Finality: This is the point where a block on a distributed network cannot be altered. A finality protocol confirms validators agree on the block's status at checkpoints, and when 2/3rds of the validators agree, the block is finalized. In this way, the network becomes more secure.


Because of how PoS works, it benefits both the cryptocurrencies and the investors. With the help of a proof of stake mechanism, cryptocurrencies can process transactions faster at a much lower cost which is the key to scalability.


Capitalists can stake their crypto to earn rewards in the form of passive income.


And as one of the most important factors, the PoS mechanism is environmentally a greener option, making it a more popular option among global crypto users.


Why Proof-of-Stake?

The reason behind leaning towards Proof of Stake is that Proof of Work wastes energy (electrical energy to mine the coin) to increase a system's chances of mining a new block if it has more reckoning resources.


Moreover, a Proof of Work mechanism has other shortcomings, such as security breaches, expense, and severely limited scalability. In this case, Proof of Stake consensus holds merit.


Since Proof of Stake addresses some of the significant issues of PoW, it has become everyone's favorite!


Let us now understand what the Proof of Stake mechanism is!


Proof of Stake on EtherLite

Slow transactions, sky-high gas fees, and jammed networks have made it difficult for decentralized apps users to make a fortune in the crypto world. The solution to such issues has been a long due problem for many investors and DApp makers.


Proof of Stake is the solution everyone has been looking for. It can address many concerns surrounding many cryptocurrencies.


EtherLite blockchain aims to solve the issues mentioned above by providing more security and scalability to the blockchain ecosystem. Since Elite Cash works on the ETL blockchain, it gains all the perks of its supporting blockchain and can be efficiently used as a utility token.


Stakeholders are occupied with keeping the network operating. Delegators participate by delegating their stake while validators uphold the network.


Since EtherLite is a Pure Proof-of-Stake, it requires ETL to maintain the network. When validator nodes stake a minimum of 100,000 ETL, they receive rewards and fees in return. If any validator is engaged in malicious activities, their staked ETL is confiscated.


Due to the pure PoS mechanism, ETL ensures a quick and immutable network. Such a consensus mechanism helps the network process faster with negligible gas fees. On top of that, with a block time of nearly 5 seconds and 10,000+ transactions per second, ETL is more scalable. What more? It can also support the latest web interface technologies like web3.0 to provide high throughput.


Stake Your ELC Tokens in the Elite Cash PoS Launchpad

ELC staking interest distribution by stakeholders
ELC staking interest distribution by stakeholders

Elite Cash offers a passive income program for its users where stakeholders can stake their tokens in the Elite Cash PoS system to earn up to 33% interest per month. Stakeholders will be rewarded with ELC coins each month.


The PoS staking mechanism offers different interest rates according to the position they hold. The first 1,000,000 users will get 33% interest per month. Stakeholders between 1,000,000 to 2,000,000 will get 16% per month.


Stakeholders between 2,000,000 to 3,000,000 will get 8% per month. Lastly, stakeholders between 3,000,000 to 30,000,000 will get 4% more ELC tokens in interest.


Conclusion

Being a pure Proof-of-Stake version, network clogging might be a thing. Nevertheless, it still supports all the existing smart contracts and Web3 features. As a result, DApp developers can easily develop new tokens or integrate existing smart contracts with the ETL chain.


Being a pure PoS based network, EtherLite is set to create a space where all major DApps can be available to transact under one roof. Moreover, it solves many existing issues that helps expand the blockchain network and its usage in the community.

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DISCLAIMER

This article does not constitute any financial advice, and all suggestions/recommendations in this post are for informational purposes only. Elite Cash does not bear any responsibility for your loss. Please consult your financial advisors before investing in cryptocurrencies.