WHAT IS PROOF-OF-STAKE? A COMPUTER SCIENTIST EXPLAINS A NEW WAY TO MAKE CRYPTOCURRENCIES, NFTS AND METAVERSE TRANSACTIONS

Proof-of-stake is a mechanism for achieving consensus on a blockchain. Blockchain is a technology that records transactions that can’t be deleted or altered. It’s a decentralized database, or ledger, that is under no one person or organization’s control. Since no one controls the database, consensus mechanisms, such as proof-of-stake, are needed to coordinate the operation of blockchain-based systems. While Bitcoin popularized the technology, blockchain is now a part of many different systems, enabling interesting applications such as decentralized finance platforms and non-fungible tokens, or NFTs. The first widely commercialized blockchain consensus mechanism was proof-of-work, which enables users to reach consensus by solving complex mathematical problems. For solving these problems, users are commonly provided stake in the system. This process, dubbed mining, requires large amounts of computing power. Proof-of-stake is an alternative that consumes far less energy. At its core, blockchain technology provides three important properties: Decentralized governance and operation – the people using the system get to collectively decide how to govern and operate the system. Verifiable state – anyone using the system can validate the correctness of the system, with each user being able to ensure that the system is currently working as expected and has been since its inception. Resilience to data loss – even if some users lose their copy of system data, whether through negligence or cyberattack, that data can be recovered from other users in a verifiable manner. The first property, decentralized governance and operation, is the property that controls how much energy is needed to run a blockchain system.