POS Coins

Proof of Stake (POS) Coins – A Complete Guide

Proof of Stake algorithm is a widely used term in the Cryptocurrency circle and has been making waves already. Why is the concept gaining strength over POW?

Let us dig into the details.

What is Mining?

Mining verifies the legitimacy of a transaction and avoid issues related to double spending. Mining often rewards the miners with coins for their successful mining efforts.

What is Proof of Stake?

Proof of Stake (POS) is a type of computer algorithm through which a person validates the block transactions according to the number of coins in his/her possession. This would in turn mean that the greater the number of coins owned by a person, greater will be the mining power of the miner.

POS concept eliminated the shortcomings associated with Proof of Work concept. Unlike the latter, POS does not require the process of mining to validate a transaction wherein the solution of complex mathematical equations will result in the reward of the mined coin to the miner. Meanwhile discover the top ten Proof of stake coins that are in the crypto market today!

How does Proof of Stake Score over Proof of Work?

Proof of Stake effortlessly tackled some of the inherent issues in the Proof of Work Concept.

How does POW Algorithm Work?

To initiate a transaction, the data is first embedded into a block and then duplicated across all the nodes that a part of the network. These nodes act as the admin and validates each transaction in the block. In order to do so, the miners will have to solve complex computational equations and the first miner to solve the block gets the mined coin.

The verified blocks becomes a part of the blockchain, which is a public transparent ledger. This is called the Proof of Work.

Huge Expenses for the Miners?

Mining in such a scenario with the normal PC that one would have at home is impossible. It requires computers with insane hardware and software specifications, the power to run them, proper coolants and so on.

Mining operations occur in educated environments like mining farms. There are proper infrastructural facilities for the smooth management and operations of the computers in such farms. Needless to say, the farms require huge amounts of operating costs which are mostly incurred by the miners.

An alarming fact – A mining farm will consume nearly the power consumed by two households to mine one bitcoin.This explains the high operational costs to a great extent.

Fatal for the Cryptocurrency Market?

Recently, it has been observed that the miners are often selling the coins mined by them for cash so that they could manage the cost of operations of mining. This has proved fatal for cryptocurrencies by creating a downward movement in the market.

Proof of Stake addresses this issue in an elegant manner by attributing the mining power to the proportion of coins held by a person. Thus, a POS miner is limited to mining transactions that is proportional to the stake his ownership stake.

Another potential risk of POW is that in the long run, there will be very few miners left due to the unavailability of reward from mining.

Advantages of POS Algorithm

1. As pointed earlier in the article, the POW based mining activities require a lot of energy and high performance computers. Adopting POS can cut down the energy cost to considerable amounts. Hence, POS coins mined in this manner are way more energy efficient than coins that are based on Proof of Work algorithms.

2. In POW based mining, the miners don’t own the coins and look for maximizing their profits. Under POS, those guarding the coins will always own the coin.

Which are the popular POS based Coins?

Though the methodology is relatively new, there are several people coming forward to be the stakers. They can earn anywhere between one to 5 percent return annually on the staked coins. Currently, there are more than 100 different POS coins that are performing exceptionally well in the cryptocurrency market.

If you are looking forward to be a stakeholder, here is our top picks.

  • PeerCoin
  • NEO
  • BitShares
  • Disk
  • PIVX

  • If you want to take the unbeaten track, you can opt for customized Cryptocurrency development to get your own POS coins and market them.

    POS offers better algorithm for mining in terms of the energy aspects as well as the safety aspects. The network is more secure as the hacking proves to be very expensive. The hacker would have to stake a claim of 51 % to cause a harm and chances are high that the market would react to the prices before he succeeds in staking a majority claim.

    We can definitely vouch for POS over POW anyday.

    Leave a Reply