Many popular cryptocurrencies use the Proof of Stake consensus mechanism. In a very short time "dönüşen" Apart from Ethereum, Solana, Cardano and dozens of other blockchains operate as Pos.
In this article, we will explain how it works and answer popular questions about the role of Proof of Stake in the crypto space.
Proof of Stake nedir?
Blockchains are designed to be decentralized. The underlying structure suggests moving away from a single authority processing transaction data and keeping records directly. Alternatively, numerous blockchain participants actively contribute to confirming transactions and updating the ledger. Consensus mechanisms ensure that everyone plays by the rules.
consensus, "double spending" It prevents users from spending their digital coins more than once by providing a solution to the problem. Otherwise, crypto transactions will not work functionally.
Proof of Work is the oldest consensus mechanism. Since Bitcoin is used by the blockchain, it is generally perceived as the underlying foundation of blockchain technology. Proof of Work relies on miners confirming transactions and adding new blocks.
Modern miners work with powerful hardware that processes calculations to solve complex mathematical problems. The first miner to solve the problem records the next block of transactions on the blockchain and earns a reward in the form of newly minted coins.
Unfortunately, this system requires high energy consumption. Compared to other consensus mechanisms, it has higher fees and slower transaction speed.
On the other hand, Proof of Stake (or Pos) offers participants to lock a certain amount of their tokens in a smart contract instead of consuming electricity and engaging in futile activities to earn crypto rewards. By doing this, they get the chance to verify transactions and take profits. If they attempt to cheat or fail to prevent a fraudulent transaction, they risk losing what they have staked.
Proof of Stake blockchains include Solana, Terra, Cardano, and more recently Ethereum.
Proof of Stake Artıları
Environmentally friendly due to low energy consumption. Less competitive and lower barrier to entry: no need to purchase and maintain expensive equipment. Potentially more scalable when additional solutions are implemented
Proof of Stake Cons
May be less effective than Proof of Work in a security context. Theoretically, there is a possibility of centralization as validators holding large amounts of tokens can interfere with transaction verification processes. A number of coins must remain locked for a minimum period of time and cannot be used in the event of an emergency
What is staking?
Staking is the process of locking an amount of cryptocurrency in a blockchain validation pool. Stakers, also known as validators, participate in transaction processes.
Depending on the staked amount, the blockchain algorithm selects validators, those who stake more have priority and collect the rewards. Verifying incorrect transactions will result in penalties or loss of all staked funds.
Recently, staking has become the best alternative to holding, so everyone can earn extra income on top of their long-term investments and collect the returns. The best part about staking is that you don’t need to be actively involved in trading to make a profit. Instead, you lock your funds for a certain period of time and earn a reward, similar to bank interest. Market interest rates can vary between 1% and 100% depending on the active asset staked, and are generally below 10% on an annual basis.
Staking is already supported by most crypto exchanges. Almost all of them require your funds to be locked for a certain period of time, which only a few exchanges offer liquid staking. In liquid staking, you can access your funds at any time and rewards are accrued based on the minimum daily balance of active assets you hold.
Crypto trading platform T-rex offers the best liquid staking option on the market, with over 10 coins to choose from and APY (Percentage Annual Return) of up to 40%. Available coins include CVX, STETH, EMC, MINA, SMART, HYDRA, AXS, and others. You can find the full list of coins and tokens available for staking on the T-rex app and exchange here.
A laughing case
Proof of Stake consensus mechanism is a sustainable alternative to Proof of Work. It also makes it possible for anyone to participate in the verification process with minimal expenditure. Not only that, it also allows investors to stake their cryptos and earn passive income.