Proof of stake
Proof-of-stake is a method of securing a cryptocurrency network through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run hashing algorithms to validate electronic transactions.[1] It is most commonly used as a supplement to proof-of-work in Peercoin[2] and a few other electronic currencies.
Usage in Peercoin
Peercoin's proof-of-stake system is based around the concept of "coin age", a number obtained from the product of the currency amount held times the amount of time it has been held for. When generating a proof-of-stake block, the user sends some money to themselves, consuming their coin age in exchange for a preset reward. This minting transaction becomes more likely to succeed over time until a valid block is found, generating a new block on the blockchain and a payout for the proving user.[2][3][4] This process secures the network and gradually produces new coins over time without consuming significant computational power.[5]
Both proof-of-work and proof-of-stake blocks are used in Peercoin, although the main blockchain is determined by the highest total consumed coin age (from proof-of-stake generation) instead of the total combined difficulty of the chain (determined by proof-of-work blocks, as in Bitcoin). Peercoin's developer claims that this makes a malicious attack on the network more difficult.[2][6]
The first 100% proof-of-stake system was Nxt.
Variants of Proof-of-stake
BlackCoin's 'Proof of Stake v2'[7] claims to improve network security, by removing the priority given to older coins in the original proof-of-stake system.
Reddcoin's 'Proof of Stake Velocity' (PoSV)[8] claims to encourage velocity i.e. movement of money between people, rather than hoarding.
Criticism
Some people argue, that proof of stake is a bad choice for a distributed consensus protocol.[9][10] The main problem is what they usually call "there is nothing at stake". It means that in case of accidental chain fork (or any other kind of distributed disagreement), a person can "vote" for the both variants, because he has a stake in each branch. He doesn't need to choose one option to vote (like in proof of work system), and that gives him ability to try to cheat (e.g. double-spend in case of blockchain reorganization) "for free".
See also
References
- ^ Proof-of-Work vs Proof-of-Stake, 31-8-2014
- ^ a b c King, Sunny. "PPCoin: Peer-to-Peer Crypto-Currency with Proof-of-Stake" (PDF). Retrieved 2014-16-15.
{{cite web}}: Check date values in:|accessdate=(help) - ^ Buterin, Vitalik. "What Proof of Stake Is And Why It Matters". Bitcoin Magazine. Retrieved 2013-11-20.
- ^ Bradbury, Danny. "Third largest cryptocurrency peercoin moves into spotlight with Vault of Satoshi deal". CoinDesk. Retrieved 2013-11-20.
- ^ Thompson, Jeffrey (15 December 2013). "The Rise of Bitcoins, Altcoins—Future of Digital Currency". The Epoch Times. Retrieved 29 December 2013.
- ^ Whelan, Karl (2013-11-20). "So What's So Special About Bitcoin?". Forbes.
- ^ Vasin, Pavel. "BlackCoin's Proof-of-Stake Protocol v2" (PDF).
- ^ Ren, Larry. "Proof of Stake Velocity: Building the Social Currency of the Digital Age" (PDF).
{{cite web}}: line feed character in|title=at position 45 (help) - ^ Andrew Poelstra. "Distributed Consensus from Proof of Stake is Impossible" (PDF).
- ^ https://blog.ethereum.org/2014/07/05/stake/.
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