Technology
By Dan Saada
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The Simply Explained YouTube Channel has made PoS easier to understand: In 2011, a Bitcoin forum user called quantum mechanic proposed a new technique called proof of stake.
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To become a validator, a node has to develop a certain amount of coins into the network and stake. You can think of this as a security deposit.
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With POW, rich people will be able to enjoy the power of economies at scale. The amount of money they paid for equipment and electricity does not go up in a linear fashion.
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In PoS, if a node is chosen to validate the next block, it will check if all the transactions within it are valid.
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Okay. So, how can we trust other validators on the network? Well, that is where the stakes comes in.
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As long as the stake is higher than what the validator gets from the transaction fees, we can trust them to correctly do their job because if not, they will lose more money and…
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If the node stops being a validator, his stake plus all the transactions that he got will be released after a certain period of time.
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The 51% attack was described as a weak point for the PoS algorithm. If a single miner or a group of miners can obtain a 51% of the hashing power, they could effectively control…
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And a 51% attack is less likely to happen on a proof of stake, but that is not the only risk.
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They will collect more transaction fees and become even more prosperous. And thus increase their chances of being chosen as a validator even further.
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