What is Proof of Stake?
What is PoS Algorithm? How does it work? What are the types?
Proof of Stake is a cryptocurrency infrastructure algorithm like PoW . In PoS, coins are produced when the system is started and sent to wallets at certain intervals according to everyone’s investment. It is an algorithm method that you have as much power as the number of coins you have.
Mining, called mining, is required to increase your strength in Proof of Work . In this, you need to increase the number of devices you are mining or renew these devices with more powerful ones. In Proof of Stake , you only need to buy more than the related coin.
Bitcoin ‘s system is designed according to the Proof of Work (PoW) algorithm. Proof of Work technology brings additional electrical energy and hardware costs with high calculations.
In Proof of Stake system, verification is done randomly depending on the amount of coins in the wallet account of the persons. So every wallet that owns Coin is also a verifier. Of course, the possibility of using a large amount of system code as authenticators keep account is higher, and thus each transfer verification (transaction) will receive a greater share of processing.
The first Proof of Stake (PoS) coin is Peercoin . There are different types of Proof of Stake .
What are the Types of Proof of Stake?
- The first of the PoS types offers a certain annual rate of interest . In such PoS coins , when you synchronize your wallet , you earn some coins in the time elapsed ( Stake ). As an advantage of this type, users often synchronize their wallets to stake . In this way, the network is strong and the coin does not die even if the number of active users decreases. In addition, investors may choose to stake to get their interest instead of selling the coin . This prevents the coin from falling to a certain extent.
- In the second type, there is no interest and the maximum number of coins is kept constant . In such coins, your wallet must be constantly active and you must forge the coins you have. The advantage of this system is that because there are people who want to constantly forge, the system will be very powerful and transfer will take place in a very short time. Since the number of coins is kept constant, it is not defeated to Inflation . In the long run, the coin does not lose value .
He plans to leave Proof of Work on Ethereum , the second largest coin in the world, following Bitcoin, and switch to the PoS algorithm in 2018