Glossary

Proof of Stake (PoS)

Proof of Stake (PoS) concept states that a person can validate block transactions according to the quantity of coins held. This means that the validating power is proportional to the Bitcoin or altcoin owned or staked by a miner.The proof of stake was created as an alternative to the proof of work (PoW), to tackle issues of power consumption, computing power cost and fairness.

In 2015, it was estimated that one Bitcoin transaction needed the amount of electricity needed to power up 1.6 American households per day. Instead of using energy to answer PoW puzzles, a PoS validator is limited to validating a percentage of transactions that is equivalent to the ownership stake. For instance, a miner who owns 5% of the Bitcoin available can theoretically mine only 5% of the blocks.

Staking, Staking Pool

A staking pool is an aggregation of assets from multiple cryptocurrency holders to increase the likelihood of receiving block rewards from staking blockchain (blockchain validation and validating) using the Proof of Stake (PoS) system. It brings together the ability to stake and ultimately distributes block rewards based on contribution.

Staking pools are not easy to prepare, establish and maintain. Therefore, pool providers typically collect a few percent of the rewards allocated to participants in order to perform the task of making them accessible.

Also, when exiting from the staking pool or ending staking itself, if the pool is highly centralized, the procedure may be complicated and the minimum balance may be a hurdle. For this reason, beginners are more likely to use a decentralized network

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August 11, 2020
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