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What is Proof of Stake (PoS) and How Does It Work?

Proof of Stake (PoS), which came into our lives after the term Proof of Work and has become increasingly popular lately, is one of the most curious concepts in the crypto world. As a matter of fact, questions such as what is Proof of Stake or what does Proof of Stake mean have taken their place among the most frequently asked questions.

In this content, we will try to explain all the details about Proof of Stake, especially what is Proof of Stake, how it works, and the differences between Proof of Stake and Proof of Work.

Proof of Stake (PoS) Nedir?

Proof of Stake (PoS) is a stake-based block generation protocol on the blockchain.

The Proof of Stake protocol was presented as an alternative to the Proof of Work (PoW) protocol in an article published by the developers named Sunny King and Scoot Nadal in 2012.

In the Proof of Stake protocol, which was first used by a crypto called Peercoin (PPC), there is no need for powerful processors to create blocks, and there is no mining work.

Block creation studies, on the other hand, are completely based on proof of stake or proof of stake. In other words, a person who wants to take part in the Proof of Stake protocol should hold some of the relevant crypto asset and allow it to be used in block creation studies.

The reward distributions for each block created in the Proof of Stake (PoS) protocol, which can be blocked thanks to the process also called staking or staking, are distributed according to the amount of each person’s share, or in other words, the amount of crypto assets that they hold and allow to be used in transactions.

In the PoS protocol, which is a protocol focused entirely on capital strength, the person with the strongest capital has a much higher chance of becoming a shareholder, called the Validator. However, there is no guarantee that the largest capital strength in the Proof of Stake protocol will always be validator.

In the Proof of Stake protocol, validator selections are made with different algorithms to prevent monopolization. The most well-known selection types are Random and Age-Related.

  • Random Selection: Selection is made from among the weakest in terms of calculation value, but among the wealthiest shareholders.
  • Age-Based Election: In this type of election, the choice is made from among the shareholders who own the crypto asset the earliest and hold it the longest.

What are the Proof of Stake Types?

There are more than one type of block definition in the Proof of Stake protocol. The most popular and well-known options are Delegated Proof of Stake, Pure Proof of Stake, Liquid Proof of Stake and Leased Proof of Stake.

Delegated Proof of Stake (DPoS)

In the block works to be created with the Delegated Proof of Stake (DPoS) system, the shareholders unanimously determine a shareholder as their representative. This agent does not own all assets, does not transfer assets to his own account, but all decisions in the relevant blockchain will be his decision. In addition, the shareholder appointed as the representative receives the largest share of the revenues obtained thanks to this system.

Pure Proof of Stake (PPoS)

In the Pure Proof of Stake protocol system, shareholders who are block validators are randomly selected. While making this choice, it is not considered whether the shareholder wants to be a block validator or not.

In addition, in this protocol system, the income obtained as a result of block verification is distributed as a reward to all crypto-asset shareholders.

Liquid Proof of Stake (LPoS)

The Liquid Proof of Stake system is a kind of mix of standard Proof of Stake and Delegated Proof of Stake systems. In this system, which is called Baking for each block confirmation, all shareholders can earn rewards by temporarily transferring their assets to other validators.

Leased Proof of Stake (LPoS)

The Leased Proof of Stake (LPoS) protocol system, as the name suggests, works according to the lease method.

In the Leased Proof of Stake protocol system, known for the use of the Waves (WAVES) cryptocurrency network, shareholders temporarily lease their assets to validators. These assets cannot be used in any way of buying and selling transactions. Shareholders making leasing transactions receive a larger share of the income generated by this system.

Differences Between Proof of Stake and Proof of Work

Proof of Stake (POS) and Proof of Work (PoW) protocols, which basically have the same purpose and are used in block verification processes, are quite different when detailed. These differences can be summarized as follows:

  • While the Proof of Work protocol requires significant energy consumption, the Proof of Stake system does not consume energy.
  • While the Proof of Work protocol includes mining works, the Proof of Stake protocol does not contain mining.
  • In the Proof of Work protocol, the voting system is determined by the processor power, while in the Proof of Stake protocol, it is determined by the amount of shares.

Frequently Asked Questions About Proof of Stake

How is Proof of Stake Processing?

In order to be able to staking in the Proof of Stake protocol, it is necessary to buy or own an amount of the crypto asset to be staked. If this condition is met, all that is required is to become a stake participant in a stakeable liquidity pool.

Is Proof of Stake Haram?

Assets owned in the Proof of Stake system are used temporarily with a kind of lease method and income is obtained in return. Therefore, the question of whether Proof of Stake is not haram or is it permissible can be answered yes, but the best answer will be given by the Presidency of Religious Affairs.

Aslıhan Yüksel

Aslihan Yuksel, who works as a manager inleading brands and companies in the business world; As a result of his interest in the crypto world and its markets, he has been interested in cryptocurrencies, markets and developments for a long time and transfers all his knowledge within Binansal.