FAQ – What is Proof of Stake

Proof of Stake vs Proof of Work

The Proof of Stake (PoS) algorithm came as an alternative to the Proof of Work (PoW) one. These algorithms are similar in that they serve the same purpose of maintaining consensus and keeping the cryptocurrency ledger secure. However they constitute a different approach to block validation. In PoS, validation comes from committing a number of coins (stake). This is different from PoW where you need to use expensive hardware to mine, consuming large amounts of electricity in the process.

Risk of Network Attack

PoW system is also susceptible to a potential 51% attack. A 51% attack is when a miner or mining pool controls 51% of the computational power of the network, which allows them to create transactions that will be fraudulently validated.

With PoS, if an attacker had 51% of the coins they would be able to perform a similar attack. However it would not be in their best interest to do so, as damaging the network would affect the value of the coins they hold. Obtaining a 51% of the coins would require a huge investment, and all that value would be lost if people lose their trust in the network.