All blockchains have one thing in common: transactions need to get validated. Bitcoin for example does this in a process called mining which is known to use a lot of electricity (Proof-of-Work). There are other consensus mechanisms (the method by which a blockchain maintains its integrity.) that are used for validation which include Proof-of-Stake (PoS).
Proof of Stake and Staking were introduced by Sunny King and Scott Nadal back in 2012.Proof of Stake (POS) was created as an alternative to Proof of Work (POW), which is the original consensus algorithm in Blockchain technology, used to confirm transactions and add new blocks to the chain.
The Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins they hold. This means that the more coins owned by a miner, the more mining power they have.
Proof of stake chains produce and validate new blocks through the process of staking. Staking is quite similar to how someone would receive interest for holding money in a bank account or giving it to the bank to invest. You may also think of staking as a less resource-intensive alternative to mining.
Staking involves holding funds in a cryptocurrency wallet to support the security and operations of a blockchain network. Simply put, staking is the act of locking cryptocurrencies to receive rewards
Next post, we will look at how staking works, advantages and disadvantages of staking, and platforms which offer exchange staking.