Last Updated on 3. May 2023 by Martin Schuster

Explanation of PoS: In this consensus mechanism, block producers (miners) get selected according to the number of coins they hold or stake instead of their mining power. The more coins a miner has, the higher his probability of being selected to validate a block.

In proof of work, the rationale behind mining is transforming money into mining hardware and electricity and transforming that into consensus. This works because electricity and mining hardware are scarce resources.

The basic idea behind proof of stake is to internalize the scarce resource for miner selection. Instead of using electricity and hardware as scarce resources, the cryptocurrency itself is utilized for that purpose. This eliminates the intermediary step and transforms money directly into consensus.