Aug 31, 2020 • 5M

Episode 22 - Proof of Stake

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Episode details

Proof of Stake (PoS) is a blockchain consensus algorithm where the nodes put an economic value on stake to participate in block production. The problem domain is the same — to find out who should produce the next block for the blockchain.

In PoS networks, the block producing nodes are called validator nodes. The reason being — the consensus on blocks is reached via validation and voting and not through winning a race (as in the proof of work networks).

In PoS, the solution is two-fold. First of all, a pool of validators is created. Any node that wishes to become a validator, puts some economic stake in the network. This stake is in the native cryptocurrency of the network and generally has a minimum value threshold. All or a selected subset of nodes who put their stake in the network become part of this pool of validators.

To produce the next block in the chain, one of these validators in the pool is chosen using a round-robin or a pseudo-random algorithm. This selected node then proposes a new block. The other validators validate and vote on this block. If the majority of validators vote in favor of this block, then this block is accepted by the chain. In case the proposed block is bad or it doesn’t follow the rules of the chain, then the block producing validator is punished by the network and their stake is taken away (slashed).

Proof of stake has an advantage over proof of work that it does not waste all that energy in mining.