What Proof of Stake Means for the Future of Blockchain Security

Proof of stake is a consensus algorithm originally invented by Sunny King and Scott Nadal in 2012. The idea of ​​proof-of-stake (PoS) began as a way to create an alternative to Bitcoin’s proof-of-work algorithm, which requires that miners must solve cryptographic puzzles to verify transactions on the blockchain. PoS was supposed to be an energy efficient method to achieve the same.

In the same year, Peercoin became the first cryptocurrency to adopt proof-of-stake as its main consensus algorithm when it switched from Bitcoin’s SHA256 hash function used in POW algorithms (e.g. Bitcoin) and instead used a hybrid solution called Secure Hash Algorithm 256v1 with chained hashing (SHA-256c).

How does Proof of Stake work?

Proof of Stake is a consensus algorithm that relies on the coin’s age and weight to achieve consensus. The coin age is the total time that the coins have been held by one or more owners, while the coin weight is calculated by multiplying the number of coins by the value. For example, if you had 100 EOS tokens priced at $1 each (100 x $1 = $100) and that was your only cryptocurrency asset, your entire portfolio would have a coin weight of $100.

Although proof-of-work systems rely on computing power to achieve consensus and validate transactions, proof-of-stake systems rely on ownership information, making them inherently energy efficient. This is known as crypto staking, and it means that instead of burning electricity to perform complex calculations to achieve consensus (as in the case of Bitcoin), users only need to lock up their assets as collateral for a certain period of time before they can validate transactions in the system (e.g. Ethereum).

Is Proof of Stake easy to attack?

Proof of Stake is no more secure than Proof of Work. In fact, it is less secure in many ways and easy to attack.

PoS systems are susceptible to centralization because they have a higher barrier to entry for miners (same amount of coins owned) and the ability for stakeholders to vote on which transactions are valid and thus mineable.

This means that someone with a lot of coins can effectively control consensus on which blocks are added to the chain, allowing them to double-spend or prevent transactions from being confirmed. In addition, PoS systems can suffer from collusion attacks because stakeholders can easily communicate with each other before voting on consensus changes (e.g. by voting out an existing validator).

Finally, bribery is also easy in PoS systems because all stakeholders want as much money as possible when they receive the dividend payouts!

Keep an eye on the future

While the proof of stake is still growing, it is already clear that it has the potential to be a game changer for blockchain security. This technology will likely render mining obsolete, at least in terms of how we might use these terms today. But don’t expect the end of mining entirely.

Proof of Stake could also lead to more decentralized mining pools and distributed networks, enabling users to earn cryptocurrency without needing specialized hardware or taking up valuable space on their hard drives.

Potential Game Changer for Blockchain Security

Proof of Stake is a potential game changer for blockchain security. After all, it’s hard to imagine a better incentive than money and reputation for miners to protect their own hard work. Although proof of stake is still in development and has only been implemented on a few large blockchains, it shows promise as an alternative to proof of work.

Proof of Stake offers many advantages over Proof of Work:

• It is more environmentally friendly by using less electricity than Proof-of-Work systems.
• It is more democratic because users with higher stakes have stronger incentives to act honestly.
• Stakeholders’ rewards are only proportional to their voting power (which tends to increase as they invest more) rather than being directly linked to the amount of computing resources or electricity used.

Conclusion

Proof of Stake is emerging as a new way to secure the blockchain. It offers many advantages over proof of work, such as lower energy consumption. However, it also has some drawbacks that need to be addressed before adoption becomes widespread.

For businesses looking for ways to improve security, this may be an option worth exploring in 2022 and beyond as more proof-of-stake coins emerge.