CryptoCurrency 101: The Basics, What is PoS?

Part 2 in a series on the basics of cryptocurrencies. Going to do my best to be as basic, and approach this in a way to introduce people to the complex concepts of cryptocurrencies.

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Lets take a look at another approach used to both secure the blockchain and make new coins. In the first article we took a basic look at the Proof of Work (PoW). Lets take a look at Proof of Stake (PoS), unlike with PoW, the PoS does not require intense calculations to discover the next block in the chain, instead it can use a mixture of wealth, or the amount of coins held by a wallet, age or how long the coins have been held in the wallet, or even a random selection of which wallet address will sign or verify the next block on the chain. With any of these it does require the wallet to both have coins, as well as be open and running in order for that address to be chosen to sign the next block. A reason that there are different ways that PoS works is similar to the differences between different algorithms for the PoW, such as SHA-256, Scrypt, etc, it gives variation so no single person or wallet could take control of the coin!

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As seen on the right, this is one type of set up used for mining PoW coins. Notice there are many machines in use. The biggest difference you will see is that PoS coins are using part of one computer, this means just about anyone with large enough balance and a computer can compete to earn more coins!

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An example, if your wallet is holding a balance, and running, as your balance ages, or gains weight on the network it is like the water dump at a water park, so your wallet it gaining weight, once it reaches the point it is chosen, it is like the bucket dumping the water, all the weight is now gone, and you start back from the beginning. Unlike at the water park you don't lose your balance, just the weight.

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Reason the creation of the next block is important is that each new block should both include transaction that are pending, as well as the new block also releases a new amount of coins, in the case of PoS coin they are released to the wallet address that created the new block. This gives a person who is holding those coins, both a reason to hold them, as well as a way to increase their share of coins, both while also securing the block chain. As the more wallets that are running they are in a competition to determine which one is going to sign the next block. Depending on which coin your looking at the new coins released are either an fixed amount similar to PoW, or it could simply be a percentage of the amount of coins your currently holding.

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With PoS coins the biggest difference between the is the way in which they will select which wallet will sign the next transaction, and how coins are released to the chain! An example of how PoS works in some degree, you have you money sitting in a savings account, if you leave it there for a fixed amount of time, typically the full month you will make a small amount of interest, the longer you leave it, the more it grows. Same can be said for PoS coins, as these coins typically gain interest as you hold them.

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One common thing with coins that stake, is that the coins are locked up into a deposit as they are confirmed. This also means the coins now must also mature again in order to be eligible for staking again! There are many other aspects that make up the process, and these can be more challenging aspects.

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Here we took a basic look into PoS coins, what it means, how to get more coins. This is only going over the basics, so we have not looked at many of the more complex topics surrounding the PoS coins, although important to know, we will not be going over features such as coin control, master nodes, or coins that are both PoW/PoS. More on those at a later time.

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Thank you for reading, I hoped that this was informative, and at least a bit basic. I will be getting the next topic done soon. If there is anything you'd like to see written about leave it here in the comments, and I will see about writing about it soon!

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Looking to find other blogs on the same topic: [What is PoW](https://steemit.com/cryptocurrency/@smysullivan/cryptocurrency-101-the-basics-what-is-pow)
https://steemit.com/cryptocurrency/@smysullivan/cryptocurrency-101-the-basics-what-is-pow

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Sources: 1, 2, 3, 4

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