#The proof of stake was created as an alternative to the proof of work (
PoW), to tackle inherent issues in the latter. When a transaction is initiated, the transaction data is fitted into a block with a maximum capacity of 1 megabyte, and then duplicated across multiple computers or nodes on the network. The nodes are the administrative body of the blockchain and verify the legitimacy of the transactions in each block. To carry out the verification step, the nodes or miners would need to solve a computational puzzle, known as the proof of work problem. The first miner to decrypt each block transaction problem gets rewarded with coin. Once a block of transactions has been verified, it is added to the blockchain, a public transparent ledger.
#The proof of stake (
PoS) seeks to address this issue by attributing mining power to the proportion of coins held by a miner. This way, instead of utilizing energy to answer
PoW puzzles, a
PoS miner is limited to mining a percentage of transactions that is reflective of his or her ownership stake. For instance, a miner who owns 3% of the Bitcoin available can theoretically mine only 3% of the blocks.
#Bitcoin uses a
PoW system and as such is susceptible to a potential Tragedy of Commons. The tragedy of Commons refers to a future point in time when there will be fewer bitcoin miners available due to little to no block reward from mining. The only fees that will be earned will come from transaction fees which will also diminish over time as users opt to pay lower fees for their transactions. With fewer miners than required mining for coins, the network becomes more vulnerable to a 51% attack. A 51% attack is when a miner or mining pool controls 51% of the computati onal power of the network and creates fraudulent blocks of transactions for himself, while invalidating the transactions of others in the network.
#In addition to
Bitcoin,
Litecoin (
LTC) also uses the
PoW method.
Nxt (
NXT) is an example of a cryptocoin that uses the
PoS method. Some coins like
Peercoin (
PPC) use a mixed system where both methods are incorporated. As of May 2017,
Ethereum (
ETH) is in the process of completely switching from a
PoW to a
PoS system.
, good luck my friend