It's beginner's series time! Today we're focusing on what proof of stake (PoS) coins are, what coins use PoS, and what makes these coins unique.
April 07, 2021 · 4 min read
Beginner's series: Proof of stake
The popularity of cryptocurrencies is on the rise. However, Bitcoin’s proof of work consensus mechanism, has many detractors, mostly for its high power usage. Fear not, plenty of lower impact alternatives exist. These are known as proof of stake coins. We have touched on proof of stake consensus in-depth in other articles, so this will focus on what PoS coins are, what coins use PoS, and what makes these coins unique.
Proof of Stake: Proof of stake is a consensus mechanism that many cryptocurrencies use to secure their transactions. Proof of stake requires users to allocate collateral to the network, and in return, they are responsible for validating a proportion of transactions.
Why it exists: Proof of stake was created in an attempt to create a more equitable and sustainable alternative to Bitcoin’s proof of work. By using people’s collateral as security, rather than energy-intensive calculations, Proof of stake can remain just as secure as proof of work, without the energy cost.
To help you on your proof of stake journey, we’ve included what we believe to be the best proof of stake coins! Many coins offer a great way to get into cryptocurrency while earning some on the side for your efforts! We have a great blog on the top proof of stake coins to look for in 2021, but below is a quick list of the popular PoS coins, and what proof of stake variant they use. It’s a great list to start your proof of stake journey with! Check out our staking coins list below:
If you’re interested in investing or just learning, this list will help you on your way! We have a blog that talks about these coins in more detail, so check that out!
Like all financial decisions, you should be aware of what you’re getting yourself into. The unique nature of staking means that through your investment, you are helping it succeed. This is why it’s very important to choose a project that you believe in. Staking is a very active investment.
Proof of Stake coins are unique, but why?
From standard proof stake, many variations have taken shape. From delegated proof of stake to hybrid variants, blockchain consensus is constantly changing. And this is a good thing. With peer-to-peer systems, there are always bad actors looking to take advantage. It is up to us to continue to innovate and keep our networks secure. If you have a good understanding of proof of stake, it makes understanding cryptocurrency a lot easier.
As we previously stated, proof of stake exists as an extension of Satoshi Nakamoto’s (The creator of Bitcoin) proof of work. Satoshi envisaged that Bitcoin would become a true peer-to-peer network, with all users participating in transaction validation. However, due to the rapid rise in ASIC mining technology (fancy and expensive mining machines), it has become too expensive for individuals to participate, and because of this, we’ve seen the rise of massive mining farms, leading to concerns about the centralization of the network.
The beautiful and unique aspect of proof of stake is that it leads us closer to Satoshi’s vision. Everyone who owns a small piece of the network is able to proportionally affect its health. This accessibility fosters an inclusive community of workers. The effect of mining farms on Bitcoin’s community has been monumental. It has relegated producers to the status of consumers, with many using third-party mining pools instead of their own computers.
This goal of an inclusive and accessible network has been fundamental to the Divi product project since its foundation in 2017. If cryptocurrencies are to achieve a mainstream status they must become less complex, more accessible, and more equitable for all. Proof of stake coins are unique because their security is derived from users buying into the network and believing in the future of the coin.
If you would like to learn more about Bitcoin’s proof of work, we have a blog on that too! That way, you are able to understand proof of stake vs proof of work, and the strengths and weaknesses of both.
If you’re interested in staking, and wondering which coins offer what returns, check out this proof of stake calculator by Staking Rewards!
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April 07, 2021 · 4 min read