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Author: Admin | 2025-04-27
Of finding a solution. This process is competitive and whoever generates the acceptable Proof of Work first wins the next block. This whole process of finding new blocks is called mining.Proof of Work is the most popular consensus algorithm and some of the best examples of coins that uses PoW are Bitcoin, Ethereum, Litecoin and Monero. In Proof of Work the network is proven to be secure but the biggest downside is it is highly energy consuming. Now the answer to this high cost of mining is Proof of Stake.Proof of StakeProof of Stake is similar to Proof of Work. Their job is same; that is validating transactions, creating new blocks and distributing new coins.Peercoin is the first cryptocurrency to implement Proof of Stake which in addition to PoS also uses PoW. You’ll come across many hybrid PoW/PoS coins where the PoW is used for the creation of new coins and PoS is used to validate and maintain the security of the network. On the other hand there are also Pure Proof of Stake coins such as NXT, Blackcoin and Neblio. Among them Blackcoin and Neblio has coin inflation. But in NXT the max supply of 1 Billion NXT has reached and there won’t be any new coins created. In coins like this there won’t be any block rewards; instead the winner of the next block receives transaction fees as reward. So how the winners are determined in Proof of Stake?How it Works?Just like PoW; a sort of lottery is involved in Proof of Stake as well but the process is quite different. In Proof of Stake system there is no complex mathematical puzzle and so there is no computational power or burning of energy involved. Here the creator of the next block is chosen deterministically based on their wealth aka stake.Proof of Stake mining is a process of holding coins in wallet unlocked and leaving them connected to the network 24 / 7. The creator of the next block will get stake rewards and this winner is chosen based on their coin shares. In order to participate in staking no minimum amount is required. However more the coins you stake and more longer you stake them; more the chance you’ll get to win stake rewards. Now let’s see how masternodes are different compared to Proof of Stake and what benefits do they offer to the network and its users.Proof
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