A network of computers for every cryptocurrency helps regulate the issuance of new units, validate entries into a distributed database, and secure the software (blockchain) from attackers. This system is known as the “consensus mechanism.”
The two fundamental consensus mechanisms used are Proof of Work (PoW) and Proof of Stake (PoS).
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Both PoS and PoW are used in the transaction process to regulate and ensure the validity of transactions between users in cryptocurrency trading. In these mechanisms, users are added to a blockchain’s public ledger, creating new tokens without any central party’s help. Proof of work (PoW) and mining are closely related ideas because the network requires considerable processing power, thus consuming more energy. Here, virtual miners verify proof-of-work, and it is more secured.
In a Proof of Stake (PoS) system, staking serves a similar function. However, the proof of stake system requires network participants to stake their cryptocurrency as collateral to support the new block added to the blockchain; to earn some crypto in exchange. Energy consumption is one significant difference between proof-of-work (PoW) and proof-of-stake (PoS). PoS blockchains do not require miners to use electricity on duplicative processes, and they allow networks to operate with substantially lower energy consumption.
Staking is also a great way to put your cryptocurrencies to work and earn passive income (rewards). Some cryptocurrencies offer high-interest rates for staking, and cryptocurrencies secured through staking are Proof-of-Stake coins (PoS coins or PoS crypto). They include – Ethereum, BNB, Flow token, DASH, etc. Casper crypto, for instance, is the first live proof-of-stake (PoS) blockchain built off the Casper CBC specification. It is designed to accelerate enterprise and evolve to meet user needs in the future while fast-tracking developer adoption of blockchain technology.