Proof of Stake (PoS) or Proof of Participation is a consensus protocol created to replace the well-known Proof of Work, providing better security and scalability to the networks that implement it.
La Participation test, is one of the two most widely used consensus protocols in blockchain technology. His name in English is Proof of Stake. From there derive the acronym PoS, with which it is known. The objective of this algorithm, as in PoW, is to create consent between all the parts that make up the network.
You can review the differences and similarities between both protocols in this PoW vs PoS comparison.
At nodes. who work in PoS are called validators. The decision on which node to validate a block it is done randomly, but giving greater probability to those who meet a series of criteria. Among these criteria we can mention the amount of reserved currency and the time of participation in the network, but others can be defined.
Once established, the node selection process starts randomly and when it ends, the chosen nodes will be able to validate transactions or create new blocks.
This shows that Proof of Stake is a process completely different from the well-known Proof of Work (PoW) protocol. Where each of its nodes do hard computational work to solve cryptographic puzzles. Unlike PoW, which requires large amounts of energy and specialized equipment to carry out its operations, PoS is a much simpler and energy-friendly process. For this reason, many blockchain projects are interested in this new protocol.
The first currency to use this protocol was Peercoin in 2012. Then others appeared like NXT y Bitshares who also use this protocol.
Why was the Proof of Participation created?
The Proof of Stake protocol was created by the renowned developer Sunny king, in 2011. In 2012, King formally introduced the whitepaper de the ppco, where he made it clear how the PoS algorithm worked. The objective was to solve some known PoW protocol problems. Among them are the following:
- Lack of scalability and speed. The marketing process includesseveral phases that are reflected below: mining is. adds a high level of latency to be able to approve transactions and produce new blocks. However, PoS avoids this situation. In PoS blockchains, verifications are performed by nodes with high coin holdings. In this way, the verifications are done quickly, positively impacting the scalability and speed of the network.
- The high energy consumption of the mining process. The mining process in PoW requires a lot of computing power, which generally comes from machines with high electricity consumption. PoS changes the mining process to a participation process reflected in the holding of coins or in the time within the network.
- The decentralization of the network. This is a problem that affects PoW networks and that is becoming more and more palpable when looking at large mining pools. A situation that centralizes the network in the hands of a few. PoS seeks to solve this, diversifying and democratizing the access to the participants in the different tasks of the network.
- Subtract financial interest from 51% attacks. The 51% attacks, are one of the concurrent fears in PoW networks. It is enough for a malicious mining group to have 51% of the computing power of the network for the disaster. Well, with that capacity, the mining group can manipulate the blockchain at will. But in a PoS system, this is only possible if the attacker owns 51% of all coins. If the attacker makes such an attack, the value of the coin tends to drop. Which leads to very large economic losses for the attacker. This situation serves as a deterrent to prevent these attacks, while maintaining network security.
How does the Proof of Participation work?
The operation of the Proof of Stake protocol is quite particular.
This system looks for incentivize participants to have a certain amount of coins at all times. This allows them to be chosen by the random selection process that is carried out to designate tasks. Under this scheme, those who have more reserves have greater weight in the network and greater opportunities to be chosen. Once chosen, web3 or wa can validate transactions and create new blocks within the network. Allowing them to receive earnings and incentives for the work done.
PoS protocol example
A simpler way to explain this process would be the following example:
Imagine that you are part of a network of 100 investors. From that network, a first group of 50 investors own 1,000 coins each. Another group of 30 investors, hold 2,500 coins each. And a last group of 20 investors, they own 10,000 coins each. In the following table, you can see the data of each of the mentioned groups and their weight of participation in the network.
Thus, it is clearly seen that the Group C, He is the one who has the largest participation in the network A total of 61,54% and 200.000 coins to be exact. Now, it is time to carry out the process of random selection in the network. This means that those who are in Group C are more likely to be selected. But not only they are selected. Members of the Groups A y B. This is done in order to democratize and decentralize the network.
Greater tenure does not guarantee selection as a node, but it does provide greater opportunities. With this, it is sought that all those who are within the network benefit without suffering discrimination. In addition, any of the investors in Groups A and B can invest more to increase their level of participation.
Once selected, investors have the ability to perform the tasks that they are allowed. Investors perform these tasks in order to receive incentives and earnings proportional to their participation in the system. After the round, the selection process is restarted so that other investors can participate.
In addition to this, funds used as holdings cannot be used and must be locked within the blockchain. In this way, it is guaranteed that the funds will always be available as collateral for the validator node. However, the node you can add new funds at any time, in order to further increase their level of participation.
PoS Features
The Proof of Stake (PoS) protocol has a wide variety and powerful features, among which we can mention:
- It is a technology more respectful with the environment. This is thanks to the fact that it does not need powerful machines for mining activities. Which means that its energy consumption is reduced.
- It allows a better alignment of objectives and incentives among the members of the network. In this way, each of those who are part of the network seek to maintain said network for a long period of time.
- It improves decentralization and democratizes access to the network. This thanks to the fact that everyone can participate in the network, as long as they meet their participation quota. In PoS networks, the concepts of mining and the equipment that this task entails do not apply. What avoids the concentration of power in a few hands due to how expensive their activity may be.
- The delivery of rewards is more proportional. Due to the random selection system within the network, which is intended to assign tasks to those who have coin possession. Those who have more possession have a greater chance of being chosen, of making verifications and receiving profits with it.
- Network security is much higher. Since it solves or hinders certain attack schemes already known, such as the 51% attack.
- Offers greater scalability. This is used as one of its main characteristics. The speed and scalability of PoS networks far exceeds PoW networks, as it does not require any intensive computational work that consumes a large amount of time. This makes PoS perfect for any blockchain that wants to be used as a retail payment system, where large numbers of transactions are required to be verified per second.
- There is the risk of losing funds due to malicious attacks. PoS systems require that the user's wallet is always open and connected to the Internet. This creates a security issue that can allow hackers to exploit vulnerabilities to steal funds from such wallets. One more reason to follow common security criteria when using this system.