Rebuffing the popular stereotype: Why Proof of Stake (POS) coins could rule the crypto space.

Rebuffing the popular stereotype: Why Proof of Stake (POS) coins could rule the crypto space.

By Dzoelx | Scripts | 19 Oct 2020

Newest blockchain technology and cryptocurrency projects have developed a number of consensus algorithms different from the earliest Proof of Work algorithm and the Proof of stake algorithm too. Proof of concept, Proof of Knowledge; Proof of solution (lol)…you could name a few more. Consensus algorithm is a defining feature for blockchains and determines the decision-making process of the blockchain.

Proof of work is the earliest blockchain consensus algorithm. Despite being popularly associated with cryptocurrency and the blockchain technology, this concept has been in existence long before the advent of cryptocurrency. Introduction of Proof of Work consensus in cryptocurrency have served a huge point of attraction, its integration into blockchain technology has made the blockchain sophisticated and fueled communal participation in the process.

With the advent of Proof of Stake algorithm, cryptocurrency and blockchain enthusiasts have rallied around it and numerous projects have adopted it to govern decision making and token generation on their blockchain.

First applied by the ‘legendary’ Peercoin, the proof of stake algorithm randomly selects the validator of the next block based on their wealth and age. Wealth in this sense is the number of tokens they have staked on the network. Age is determined by how long these tokens have been at stake on the network. Proof of stake blockchains use this work-around to achieve distributed consensus. Participants on the network selects a desired validator and stake their tokens with them.

‘Miners’ in a proof of stake blockchain are known as validators. A validator is required to lock-up a number of tokens on the network. Validator who validates a block is chosen according to the already stated criteria. Being chosen to validate a block in a proof of stake network is a ‘battle of quantity’, to stand more chances of being chosen, one simply has to stake more tokens, in other words ‘just throw more money at it!’

The selected validator validates the block and is rewarded with tokens which are either a percentage of the fee paid for the transaction relative to the number of tokens staked by the validator or just a predetermined block reward. Participants staking their tokens with the validator gets a percentage of the total reward relative to number of tokens they had staked.

To be frank, I’ve always been a fan of Proof of work coins, to an extent I feel it is cleverer and a more sophisticated technology than Proof of stake. But with foregoing and for some obvious reasons, Proof of Stake algorithm looks poised to rule the space…in the very near future; whichever way, Proof of work still holds a special place in my list.

Why am I rooting for Proof of stake projects? Well, a couple of reasons (in no particular order of importance):


Growing interest in passive income



Everyone wishes to make their money work for them, myself especially; I’m certain you do too. The quest for passive income has never been this popular. More than ever, people wish to earn and enjoy the money they didn’t have to break a sweat to make.

Cryptocurrencies are arguably the best investments of the past decade, yielding mind-blowing returns and turning nothing into something. It presents a flexible investment opportunity despite its pronounced volatility. The ‘lambo’ and ‘moon’ talks are popularized by cryptocurrency investors. Cryptocurrency values skyrocketing over time have gladdened the hearts of investors, and in a very interesting way, Proof of stake cryptocurrencies makes things even better…

Proof of stake cryptocurrencies gives investors a wider income opportunity, without actually breaking a single sweat. Stake them, forget them, the income keeps coming. Even if the price of cryptocurrencies gets fixed, Proof of Stake believers still have little to worry about. Proof of stake cryptocurrencies are the real passive income earners. In contrast to Proof of work cryptocurrencies, staking your tokens is the only thing you need to earn with your proof of stake tokens; if you are a validator, this could change anyways. But who wouldn’t want ‘absolutely’ free money…you wouldn’t be here if you don’t.




What if you don’t even need a miner to earn tokens after all, you heard that right; you know that actually. Being a POW miner costs a lot, same as running a validator node. On the average, validator nodes are relatively cheaper to run than a Proof of work mining farm.


Now, you’d argue, ‘you can join a mining pool in Proof of work blockchains’. That’s right anyways, but proof of stake projects presents a far better APR, most presenting 5% – 40% yearly return. For a holder just joining a validators pool, your tokens are basically all you need to start earning…and a supported wallet too. ‘The best way to earn bitcoin is to buy bitcoin’ same as many other Proof of Work cryptocurrencies; this is not the case with proof of stake coins. An average investor could participate in staking programs and earn good returns, something that delights any investor.


Energy conservation



A 2019 BBC publication estimates that bitcoin mining consumes more electricity than the country of Switzerland, reflecting on this:

Currently, the tool estimates that Bitcoin is using around seven gigawatts of electricity, equal to 0.21% of the world's supply. That is as much power as would be generated by seven Dungeness nuclear power plants at once. Over the course of a year, this equates to roughly the same power consumption as Switzerland.

Continuing his report on bitcoin energy consumption, bitcoin energy expert, Mr. de Vries said that, despite its many proponents, the Bitcoin network has an energy consumption problem. It uses lots of energy despite processing fewer than 100 million financial transactions per year. He also stated that Bitcoin still appears to use far more energy per transaction than all the world's banks put together, when considering the amount of energy used by data centres. Read the whole report here

Well, if that isn’t a whole lot used up, then I’m short of words to describe it. Mining Proof of Work cryptocurrencies requires an enormous amount of energy, a very different issue with Proof of stake. If energy consumption of POW coins ever becomes an important issue, then all road leads to proof of stake cryptocurrencies.


Scalability and flexibility


Proof of work blockchains have a scalability and flexibility issue. The ethereum blockchain processes just 16 transactions per second, bitcoin blockchain performs even lesser. You guess it right, these blockchains are very slow and cumbersome.
Screenshot 23.png
Chart culled from Etherscan

The size of Ethereum’s archival nodes currently sits at over four (4) terabytes (4Tb) and the actual blockchain size well over a hundred (100) Gigabytes and each block adding two (2) Megabytes to this already huge figure. The Ethereum blockchain according to many ‘will never scale’. In 2019, a Bloomberg report claimed the Ethereum blockchain is ‘almost full’. Scalability and memory friendliness are both very appealing features and good ingredients for mainstream adoption. Unfortunately, most Proof of Work blockchains lack both of them.

It would be hasty to pass a verdict on the security implications of both algorithms and their effect on the value of the cryptocurrency. Proof of work cryptocurrencies currently rule the crypto space with bitcoin and ethereum occupying the first and second position and ethereum tokens running the space. You’ll risk a 51% attack and centralization with any of this consensus algorithm.

However, the future holds many surprises and the rise of Proof of Stake projects won’t be a huge surprise. Ethereum is going POS, the ‘future’ might be closer than we think


Freelance writer| Digital marketer| Web & mobile designer and developer | Follow me on medium:


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