Close this search box.

Table of Contents

What Does Proof-of-Stake (PoS) Mean in Crypto?


Proof-of-Stake (PoS) in cryptocurrency is a consensus mechanism where block validation is determined by the number of coins or ‘stakes’ a miner holds in that cryptocurrency. Unlike other models where computational power determines the selection process, PoS gives mining rights based on the proportion of coins held by a miner. This method is considered to be energy-efficient and reduces the risks of centralization.


Here is the phonetic pronunciation of the keyword: “What Does Proof-of-Stake (PoS) Mean in Crypto?”[wɒt doʊz pruːf ʌv steɪk (pos) miːn ɪn kriːptoʊ]

Key Takeaways

  1. Energy Efficient: Unlike Proof-of-Work (PoW) used by Bitcoin, which requires vast amounts of computational power and energy, Proof-of-Stake (PoS) is a more energy-efficient method. It encourages users to “stake” their coins in the network to validate new transactions and blocks, thereby consuming less power.
  2. Security and Decentralization: PoS helps in maintaining the security and decentralization of the network. Users who stake high amounts of cryptocurrency have greater chances of being chosen to validate transactions. However, malicious activities are deterred by the fact that any attempt to attack the system would diminish the value of their staked coins.
  3. Poised for Greater Adoption: Due to its energy efficiency and security, PoS is becoming a go-to Consensus Algorithm for several new cryptocurrencies. Also, major existing coins like Ethereum are planning to transition from PoW to PoS, offering scalability and sustainability.


Proof-of-Stake (PoS) is a crucial concept in the crypto and blockchain space because it’s an alternative consensus mechanism to Proof-of-Work (PoW) used by many cryptocurrencies for transaction validation. Unlike PoW, which relies on miners expending computational energy to solve complex puzzles, PoS is a more energy-efficient system where validators are chosen to create a new block based on their wealth or ‘stake’ in the given cryptocurrency. This system potentially enhances security, as an attacker would need to buy a majority stake of the cryptocurrency to attempt a fraudulent validation, a financially impractical venture. It’s also important because the more coins held in a wallet, the greater the opportunity to verify transactions and earn rewards, incentivizing further investment and ensuring network stability.


Proof-of-Stake (PoS) is a concept utilised in the cryptocurrency domain, designed to support decentralization and energy efficiency. Its central purpose is to validate and facilitate the creation of new blocks in a blockchain, thereby affirming transactions. Unlike other models that rely on mathematical puzzles, such as Proof-of-Work, the PoS model is predicated on the number of coins a person holds and is willing to ‘stake’ as a bet they are creating a valid transaction. By doing so, it removes the need for energy-intensive puzzle-solving and dis-incentivises malicious behavior, as fraud would mean losing their stake.Moreover, Proof-of-Stake is also used to encourage participation in the network. Each stakeholder gets an opportunity proportional to their stake to forge the next block. The more stake a participant has, the more likely they are to be chosen to create new blocks and receive the rewards therein, incentivizing greater participation and promoting the network’s security and liquidity. The PoS algorithm, therefore, serves a dual purpose of verifying transactions whilst incentivizing end-user engagement, contributing to the blockchain’s overall stability and security.


1. Ethereum 2.0: The Ethereum network announced plans to shift from its existing Proof-of-Work (PoW) system to a Proof-of-Stake (PoS) system, known as Ethereum 2.0. This means Ethereum holders can participate in the network’s governance, recommend changes, validate transactions, and create new blocks, simply by proving ownership of their Ethereum coins. The more Ethereum (ETH) a person holds, the more mining power they have. 2. Cardano (ADA): Cardano uses a unique PoS algorithm called Ouroboros. Here, time is divided into epochs and slots, where each slot represents a short period of time. Slot leaders are chosen from stakeholder pools, who are allowed to validate transactions and create new blocks. Stakeholders can delegate their ADA coins to these stake pools to participate in the network’s operation and earn rewards.3. Tezos (XTZ): In Tezos, a form of PoS called Liquid Proof-of-Stake (LPoS) is used. XTZ owners are able to ‘stake’ their assets to participate in the network’s consensus and governance. Participants are selected randomly to validate transactions and add new blocks to the blockchain, with greater probability given to those with larger stakes. Tezos also allows ‘baking’ , where token holders who don’t have enough XTZ to participate in validation can delegate their stakes to others.

Frequently Asked Questions(FAQ)

What Does Proof-of-Stake (PoS) Mean in Crypto?

Proof-of-Stake (PoS) is a consensus mechanism used in blockchain networks where validators are chosen to create a new block based on their stake, or the amount of cryptocurrency they hold and are willing to ‘stake’ as collateral.

How does Proof-of-Stake differ from Proof-of-Work?

Unlike Proof-of-Work where miners use computational power to solve complex mathematical problems and secure transactions, Proof-of-Stake prioritizes transaction validation based on the number of coins held by a network participant.

What are the advantages of Proof-of-Stake?

Proof-of-Stake offers several advantages such as reduced energy consumption, increased security, and incentivization of stakeholder participation. It also allows blockchains to process transactions more quickly.

What are some cryptocurrencies that use Proof-of-Stake?

Several cryptocurrencies have adopted PoS, including Ethereum (which is transitioning from PoW to PoS), Cardano, Polkadot, and Tezos among others.

Is holding a greater number of coins the only factor in being chosen as a validator in PoS?

While holding more coins generally increases a network participant’s chances of being chosen as a validator, other aspects like the age of the holding and randomness can also factor into the selection process depending on the specific cryptocurrency’s protocol.

Is the staked cryptocurrency at risk in Proof-of-Stake?

Yes, validators run the risk of losing a portion or all of their staked cryptocurrency if they validate fraudulent transactions. This is known as ‘slashing’ and is designed to act as a deterrent against foul play.

Can I stake any kind of cryptocurrency?

No, you can only stake cryptocurrencies that operate on a Proof-of-Stake (PoS) blockchain.

Related Finance Terms

  • Staking
  • Validators
  • Blockchain Consensus Algorithm
  • Staking Rewards
  • Cryptocurrency Mining

Sources for More Information

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More