Proof of Stake solves problems inherent with Proof of Work, which include:
- High energy use
- Opportunities for centralization
- Potential security issues
Proof of Stake requires much less computational power than Proof of Work; it’s designed to be more decentralized than PoW; and it’s designed to be more inherently secure in the future than PofW.
Both PoW and PofS are a process to reach network consensus, which validates transactions. The way they achieve that goal is different.
PoS algorithms achieve consensus by requiring users to stake an amount of their tokens so as to have a chance of being selected to validate blocks of transactions, and get rewarded for doing so.
In terms of compensation to network validators, PoW provides mining rewards, whereas PoS provides transaction fees as rewards.
Security is also improved over PoW since PoS validators have a natural incentive to not validate fraudulent transactions.
Additionally, PoS allows a greater number of validators, which makes the network more decentralized and more stable.
Note that not all PoS algorithms work the same way. The PoS consensus protocol is a robust system. But that hasn’t stopped developers and entrepreneurs from seeking improvements, such as the Delegated Proof of Stake (DPoS)
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