A consensus algorithm validates transactions on a blockchain network. There are several types of consensus algorithms, but the two most popular are Proof of Work (PoW) and Proof of Stake (PoS).
What is Proof of Stake?
The concept for Proof of Stake first emerged in 2011. It is currently used by a selection of smaller protocols but has yet to be adopted by any major blockchain project. That said, Ethereum intends to switch to using a PoS protocol at some point in the near term.
Here are the key characteristics of PoS protocols:
- Proof of Stake systems use validators, not miners
- There’s no mining involved and no race to guess hashes
- Instead, users are selected at random to propose a block
- If the block is valid, the user receives a reward made up of the block’s transaction fees
How does the protocol select the user?
Not just any user can be selected. The protocol selects them based on several factors, including how much cryptocurrency a user has staked. The staked balance works like bail: it encourages a validator to act honestly — as if they propose an invalid block, they could lose part or all of their stake
PoS has several core benefits over Proof of Work.
The most notable is its smaller carbon footprint: given there’s no need for power-hungry hardware, the energy demands are only a fraction of those used in Proof of Work.
What is Proof of Work?
Proof of Work (PoW) is an alternative consensus mechanism. PoW is not only the earliest example of a consensus mechanism, but it is also the most popular.
PoW was first deployed in blockchain in 2008 by the eponymous Satoshi Nakamoto: the enigmatic creator of Bitcoin — although the technology itself has been around for much longer.
HashCash is one of the earliest examples of a Proof of Work algorithm, used pre-cryptocurrency days. It required senders to perform a small amount of computing before sending an email to allow recipients to avoid spam. The computation cost a negligible amount to a legitimate sender, but costs quickly add if someone is spamming thousands of users.
Why Elitium uses PoS?
Elitium uses Proof of Stake because it’s both an environmentally friendly and extremely robust consensus mechanism. PoS powers the Elitium Staking System, based on a fork of the PIVX blockchain, with staking coin EUMS working in the background to add an additional layer of security to the network and provide fake-stake resistance.
Learn about the Elitium PoS consensus algorithm by staking the network — start staking for up to 6.5% annual rewards.
