Well, what is Proof of Stake, eh?
With scalability problems becoming a frontline issue, blockchain developers are looking at every solution possible to move forward and solve them.
One of these solutions is PoS (Proof of Stake).
So, What is Proof of Stake?
Proof of Stake is a type of consensus mechanism.
The consensus mechanism of a blockchain is the method used by the nodes (computers) in the network to come to group agreements and validate transactions.
Proof of Work has been working just fine for Bitcoin and Ethereum, however, it can’t handle many transactions per second. This is partly down to the fact it demands an unjustifiable-and-unsustainable amount of electricity.
The Difference Between PoS & PoW
In a blockchain, the transactions are grouped into blocks, then the blocks are verified by the nodes (computers) that run the blockchain. So, the transactions are verified in groups (blocks).
In PoW, the nodes (also referred to as ‘miners’) all work on the latest block at once — the first node to verify the block is rewarded with the blockchain’s native coin. This means that all nodes are using their electricity to verify the same block, which is extremely inefficient, as only one node is needed to validate the block.
In PoS, just one node is selected to work at once. Then, when the next block is ready to be mined, a different node is selected to work on it.
So, instead of all nodes working on the same block, they take turns and allow just one node to work on the latest block. This way, far less electricity is used!
It’s one node per block (PoS) vs. all nodes per block (PoW).
The electricity wasted by PoW is one of the primary reasons it presents scalability issues. It uses so much electricity that it just isn’t sustainable and so the network cannot grow to the size it needs to be.
It’s called Proof of Stake because the miners have to ‘stake’ some currency to be able to mine. This means that they must lock away some of the blockchain’s native currency on the blockchain if they wish to start mining.
The amount they are able to verify/validate is equivalent to the amount they have ‘staked’/locked away, which ensures that if they are hacked and/or attempt to commit fraud, the amount they take is insured by the amount they stake.
Ethereum are planning to switch to Proof of Stake as soon as possible — their protocol for PoS is named Casper.
When Should We Expect Casper?
There is no confirmed release date for Casper. What we do know is that the team seem to be nearing the final stages of its development, and so we should expect it sometime soon.
Just how soon is ‘soon’, though?
We wish we knew. Let’s just keep our estimate general by sticking with, ‘we should expect it sometime in 2018’.
After reading our What is Proof of Stake guide, you should now understand the core concept of PoS and be able to explain it in a brief format to anybody that asks you. If you don’t feel confident enough to do so, though, perhaps give this in-depth HackerNoon article a read!