What is Proof-of-Stake?

TLDR: Proof-of-Stake is blockchain methodology implemented on a given node based network that allows holders of tokens to receive a dividend based means of reward in relation to the quantity they hold, the quantity circulating, and the duration of the holders time staking. See the announcement thread via Bitcointalk.com for more info.

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.

Mining requires a great deal of computing power to run different cryptographic calculations to unlock the computational challenges. The computing power translates into a high amount of electricity and power needed for the proof of work. In 2015, it was estimated that one Bitcoin transaction required the amount of electricity needed to power up 1.57 American households per day. To foot the electricity bill, miners would usually sell their awarded coins for fiat money, which would lead to a downward movement in the price of the cryptocurrency.

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.


Read more: Proof of Stake (PoS) Definition | Investopedia https://www.investopedia.com/terms/p/proof-stake-pos.asp#ixzz4yzKstwc6 

Read more: Proof of Stake (PoS) Definition | Investopedia https://www.investopedia.com/terms/p/proof-stake-pos.asp#ixzz4yzIq2R8W