What Is Proof-of-Stake (PoS)?

PoS is another consensus mechanism, the method by which blockchain confirms transactions and prevents the problem of double counting. 

Double counting occurs when the same coin or token is used for more than one transaction. It is relatively quite easy to spot double counting in a centralized environment, such as a bank overseeing fiat money. But double counting under cryptocurrencies, which rely on decentralized systems, would be very hard to prevent if it were not for PoW or PoS.

While Proof-of-Work is used for Bitcoin transactions, PoS was created to work as a powerful alternative. Industry participants often point out that Bitcoin uses the amount of energy as Switzerland — highlighting the level of strain cryptocurrencies put on electricity systems. Sometimes energy costs are so high under PoW that miners need to sell coins in order to pay their energy bills. Many researchers believe PoS is significantly more energy efficient and secure compared to PoW, although some critics question the integrity of these claims.

Proof-of-Stake involves miners validating additional blocks if they have greater amounts of money locked up in the system. For example, a miner who stakes 10% of coins will only be able to mine 10% of the blocks.

PoS can be less vulnerable to cyberattacks as its structure penalizes the miner who attacks the system.