Proof of Stake (PoS)

A consensus mechanism where validators stake cryptocurrency as collateral to validate transactions.

Crypto & DeFi

Definition

Proof of Stake selects validators based on the amount of cryptocurrency they stake (lock up as collateral). Validators are chosen pseudo-randomly, with higher stakes increasing selection probability. If validators approve fraudulent transactions, their stake is "slashed" (partially destroyed). PoS uses 99%+ less energy than PoW while maintaining security through economic incentives.

lightbulb Example

An Ethereum validator stakes 32 ETH (~$100K) and runs validation software. They earn ~4-5% annual yield for honestly validating transactions. Dishonest behavior triggers slashing—losing a portion of the staked ETH.

verified_user Key Points

  • Validators stake crypto as collateral
  • 99%+ less energy than Proof of Work
  • Slashing penalizes dishonest validators
  • Ethereum transitioned from PoW to PoS in 2022

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