The consensus algorithm is called Proof of Stake (PoS), in which blockchain participants who own a specified amount of shares or assets gain the right to create or verify blocks.
In blockchain networks that use the PoS consensus algorithm, nodes (nodes) do not mine as implemented in the Proof of Work algorithm. Block verification is granted only to authorized network participants (validators).
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PoS, which emerged as an alternative to the Proof of Work algorithm used in the Bitcoin network, was developed to eliminate the high energy consumption and scalability problems required in mining.
In the Proof-of-Stake consensus algorithm, authorization is held by those who hold the most tokens or accumulate in the early period of the network.
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Algorithm rules apply as stipulated in the rules, but generally, participants with the most tokens in their wallet receive block verification authorization. In other words, the participant who wants to add the processed block to the chain must have a token.
What is Staking?
The model in which the network participant earns income in return for locking the crypto money he owns to the system is called “staking” or “staking”. Due to the nature of the Proof of Stake algorithm, those who want to verify transactions and get a share of revenue must lock their assets to the protocol. Validators cannot transfer their tokens as long as they are locked into the system.
In principle, each network participant can stake by locking their tokens, but each network has its own rules for gaining block validation and getting rewards with “staking”.
Block verification and staking rewards are usually determined by the proportion of shares. For example, the user who locks 1 percent of the total assets in the network to the system gets the right to verify 1 percent of all blocks.
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Users who lock their tokens to the system can participate in election protocols in proportion to their shares. The user with the most shares in the blockchain network will have the most votes on future changes.
For example, in the Ethereum network that decided to switch to the PoS algorithm, it was stated that those who locked 32 ETH to the system could be validators in the Ethereum 2.0 network.
Proof of Stake types
In the standard PoS blockchain network, users share revenues such as block rewards and transaction fees in proportion to their shares. As such, different protocol structures have been developed to avoid monopolization of the wealthiest network participant. Although the random and age-dependent selection method is mostly used, different PoS algorithm models have emerged over time.
Delegated Proof of Stake (DPoS)
In the Delegated Proof of Stake (DPoS) system, which uses a rank or reputation system to provide consensus, asset owners choose another user as a delegate on their behalf. The assets are not transferred, but the user selected as a delegate raises their say in the network as if those assets were their own. The delegate gets a larger share of the income he earns. One of the cryptocurrencies using this algorithm is Steem (STEEM).
Saf Hisse İspatı (Pure Proof of Stake, PPoS)
The consensus protocol called “Pure Proof of Stake” is used in the Algorand (ALGO) network. In this system, which is described as “secret self-selection” and where the user to verify the block is randomly selected, all users with ALGO are rewarded regardless of whether they want to approve the blocks or not.
Liquid Proof of Stake (LPoS)
The algorithm called “Liquid Proof of Stake” used in the Tezos (XTZ) network includes a mix of traditional PoS and DPoS systems. Approval of blocks is described as “baking”, and anyone who owns assets can receive a share reward by temporarily transferring their tokens to other validators.
Leased Proof of Stake
In the Leased Proof of Stake (LPoS) algorithm, where assets in the wallet are temporarily given to users who confirm the transaction, the user who leases the assets gets a greater share of the activities. Assets for rent cannot be used for trading. Waves (WAVES), for example, uses this algorithm.