Instead of competing through computational work, as in proof-of-work mining, proof-of-stake networks select who gets to propose and confirm the next block based largely on how much cryptocurrency a participant has staked, or locked up, as collateral, often alongside other design-specific factors. These participants are usually called validators rather than miners. The exact method used to choose a validator for each block varies between networks, but staked collateral is consistently the central factor across proof-of-stake designs.
Validators are rewarded for honest participation, typically earning a share of transaction fees or newly issued tokens. If a validator acts dishonestly or fails to follow the network's rules correctly, many proof-of-stake systems can penalise them by slashing, or forfeiting, part or all of their staked funds. This financial penalty is intended to make dishonest behaviour costly rather than profitable.
One widely cited advantage of proof of stake is energy use. Because validators are not competing to solve a computational puzzle, proof-of-stake networks typically consume dramatically less electricity than proof-of-work mining. Ethereum, for example, moved from proof-of-work to proof-of-stake as its consensus mechanism, showing that a live network can transition between these models rather than being locked into one permanently. This lower energy footprint has made proof of stake an appealing choice for newer networks concerned about the environmental impact of blockchain infrastructure.
Key takeaways
- Proof of stake selects validators based on the cryptocurrency they lock up as collateral, rather than computational work.
- Dishonest or faulty validator behaviour can be penalised through slashing, which forfeits some or all of the staked funds.
- Proof-of-stake networks generally use far less energy than proof-of-work mining, since there is no competitive computation involved.
Proof of Stake — frequently asked questions
What happens if a validator misbehaves under proof of stake?
Many proof-of-stake networks can slash a misbehaving validator, meaning some or all of their staked funds are forfeited, and they may also be removed from the active set of validators, depending on the network's specific rules.
Is proof of stake less secure than proof of work?
The two rely on different economic assumptions to deter attacks, staked capital at risk versus computational cost, and each carries its own trade-offs. Neither is universally regarded as more secure; security depends heavily on each network's specific implementation.
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