The Proof of Stake consensus mechanism has gained immense traction these days after the announcement of the “Merge” by Ethereum. A Proof of Stake mechanism basically requires users to stake an amount of tokens in order to be a part of the process of verification and creation of new blocks on the blockchain network.
The Proof of Stake consensus mechanism explained
A blockchain network runs on a core feature ie. The Consensus mechanism. This mechanism requires all the shareholders on the network to come together and be equanimous about the validity of the data that is shared on the network followed by securing the entire network. Therefore a blockchain network always requires a consensus enabling it to proceed to a new block of data.
Although the Proof of Work (POW) mechanism had become the industry standard consensus mechanism because it was used on Bitcoin, this particular consensus mechanism turned out to be too energy intensive thus forcing users to find various innovative ways resulting in the discovery of the Proof of Stake (POS)consensus mechanism.
If we compare the POS mechanism with the POW mechanism we will understand that the POS mechanism is much more compatible and efficient and utilises less energy thus making it a fair deal.
The POS blockchain consensus mechanism requires an individual or a group of people to validate a particular transaction on the network. In Order to do this an algorithm randomly picks up the validator taking into consideration the amount of tokens these people have staked on the network. These staked tokens are locked up on the network and considered as collateral. The entire process is algorithmic in nature and completely random. After a group is picked to validate the block on the network the transaction fees are awarded to the individual as a reward. However the purpose of the stake was to provide a deterrent in order a user engages in malicious activity on the network, he will immediately lose his collateral.
History – POS Technology
The POS technology was first employed by Peercoin in 2013 and since then it has gained a lot of traction. Various coins like Cardano, Algorand etc. use this consensus mechanism. Apart from that there is an iteration of the POS technology known as Delegated Proof of Stake (DPOS) consensus mechanism wherein a user is required to pool tokens in order to stake delegates. The tokens are dedicated towards the delegate that the users consider to be perfect. These delegates can influence the governance and administration of the entire blockchain network based on the support received.
Thus the POS consensus mechanism is developing itself as an innovative solution against the POW consensus mechanism and is currently waiting for events to turn out in its favour in the proposed Ethereum Merge wherein the entire network is rebuilding itself from a POW consensus mechanism to a POS consensus mechanism.