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Proof of Stake

The Proof of Stake (PoS) consensus model was proposed in 2012 in response to the substantial amount of electricity and energy required to mine a single block under the proof of work (PoW) model. Unlike proof of work, a proof of stake consensus is reached by a group of validators that are chosen pseudo-randomly. Because of this, blocks are not mined in a proof of stake system. Instead, new blocks are forged by these validators. Validators “stake” a certain amount of ETH to participate in the consensus process, which validates new transactions through a voting process. The size of the stake determines the chances of the validator being chosen to validate the next block. Good behavior is rewarded by receiving the fees associated with the block, and bad behavior (e.g., voting on invalid transactions) is penalized. This consensus model assumes that the higher “stake” each validator has in the system, the less likely he or she is to breach the system.

There are a number of proposals to fix flaws in the PoS system. The most notable proposal is moving the validator selection process towards coin age-based selection rather than stake amount to mitigate favoring the rich when selecting validators.

Prominent examples of proof-of-stake cryptocurrencies include DASH, ETH, NEO, and Neblio (NEBL).

Note: These are non-technical definitions meant for a general audience and should not be used as legal definition
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