Proof-of-Stake

Proof-of-Stake

Proof of stake voting is a voting methodology that places a value on the amount of money that any group of people has invested in a particular chain of currencies. Proof of stake protocol is not only useful for deciding the outcome of a proof of work system, but also for determining the health of a network. There are two distinct types of protocols – one that puts a value on individual assets that a user controls, and one that places a value on the collective assets of the network.

Proof of stake algorithms is a very specific category of consensus algorithms for blockchains that function by randomly choosing validators in proportion to the number of investments in the associated digital currency. Unlike proof of work systems, PoS algorithms do not reward extreme degrees of energy usage. Instead, a proof of stake algorithm uses a mathematical model to reward users for their long-term commitment to a given Digital Currency System. In a PoS system, a proof of stake is achieved by achieving a certain level of success after a period of time, and then rewarding subsequent users of the network for the performance of this long-term commitment.

The two forms of proof of stake that are most often associated with the proof of work concept are the discrete logistic function and the Byzantine consensus algorithm. In a discrete logistic function, users will be awarded rewards for generating certain quantities of blocks in a timely manner. For instance, if a user generates 1000 blocks in a week and the corresponding cumulative distribution is obtained then the user will be rewarded with some asset.

The Byzantine algorithm is a special case of the discrete logistic function, where it applies to an entirely separate network rather than the Digital Currency System as in the discrete logistic function. In a Byzantine system, there is a Byzantine validator that must defend against two different attacks. One attack occurs when validators contribute invalidating blocks into the validator’s chain, leading to the loss of their own blocks and the remaining validations on the chain will be voided. The second attack occurs when there is a network fault and validator outage, leading to the election of a new Byzantine validator and a fresh block-creation sequence. Under this condition, a new Byzantine validator must fight against the older Validator and therefore all previous Byzantine blocks are considered invalid. This Byzantine validator must obtain sufficient proof-of-stake to remain in the race and prevent the election from being declared invalid due to lack of proof-of-stake.

Proof of Stake (POS) is used for three major purposes, which include; pre-mine of block rewards, assurance of network security, and proof of transactions. The POS algorithm is also commonly referred to as proof of asset management. Proof of Stake (POS) is an algorithm for computing rewards and interest on a proof of asset system based on the distribution of block rewards and interest. The POS algorithm is used in such diverse fields as energy markets, corporate bonds, insurance, and commodity markets.

Proof of Stake is a consensus algorithm that determines the amount of difficulty in achieving a certain amount of proof of assets required to be awarded to each participant in proof of service networks like Proof of Service (POS) or Proof of Trust (POW). In the proof of service networks, each participant acts as a gatekeeper and stops blocks from being added to the ledger. In the proof of trust networks, each participant acts as a verifier, and each node performs two functions that ensure a certain amount of trust is maintained in the system.