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Staking and proof of stake

Staking and proof of stake

Staking and proof of stake

Staking and Proof of Stake

Since blockchain is a broad technology, we cannot simply talk about a blockchain to encompass them all. Consensus, the method used to validate transactions within blocks, is one of the criteria that differentiates them.

In today's world, the consensus is most commonly based on "Proof of Stake" : Consensus in which the security of the network is based on the possession of a large quantity of crypto unlike other consensuses such as the Proof of Work (Bitcoin) where the security is achieved by performing complex mathematical calculations (mining). Proof of Stake, which gave rise to the term staking. What does it ultimately mean? In this article, we'll discuss that!

Most people are familiar with staking on the yield side, but few know how it works. To put it simply, the yield results from a process of delegating its tokens (coins of the relevant cryptocurrency) to a user defined as a validator, which is defined according to various criteria depending on the network and variant of Proof of Stake. For the blockchain to be a validator in "classic" Proof of Stake, it must possess a certain amount of cryptocurrency. Alternatively, users will be able to vote to designate validators for a delegated Proof of Stake system.

As a final example, Algorand has developed the Pure Proof of Stake consensus, where tokens act as tickets and validators are chosen at random by an algorithm. The user has a higher chance of being selected if he has more tokens, but nothing is certain and it is impossible to predict who will be selected at random.

To return to the delegation, by "entrusting" tokens to this validator (which will accumulate crypto), they will then be able to verify transactions and blocks. Each time a block is validated, this work is done with the expectation of receiving a reward.

Part of this reward will be distributed to those users who have delegated their cryptos (more or less in proportion to the amount deposited, even if it varies with intermediary costs like commissions). Currently, this is the most widely used consensus because it provides a good balance between security and getting users directly involved in the development process.

To finish :

The Proof of Stake and staking have taken an imposing place in the crypto ecosystem so that today the majority considers this protocol to be the most interesting in the long term, in particular since Ethereum has moved from Proof of Work to Proof of Stake in September 2022 (The Merge).

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