HOW IT ALL STARTED: Proof-of-Work to Proof-of-Stake

As a Guardian of Persistence, I’ve dedicated a portion of my time to spread the awareness of the Network and I realized that a lot of people are new to the crypto space, and as a result, are struggling to come to terms with the happenings of this space. So I decided to spice things up by discussing the transition from Proof-of-Work to Proof-of Stake.


The Bitcoin whitepaper by Satoshi Nakamoto was written during the international economic meltdown of 2008. The Bitcoin network was founded in early 2009 with the following headline in the genesis block. “Chancellor on the verge of a second financial bailout.” The project’s motivations were obvious. With the vulnerability of our monetary institutions revealed, the search for an alternative has intensified. All this started with a voluntary, open coinage and a peer-to-peer payment network.

Crypto-anarchists and cypherpunks had dreamed about this for a long time, past efforts, such as DigiCash2 and E-Gold3, have failed.

There was a serious fault in the product. Because of this, systems need the presence of a central operator and were not resilient. By concentrating on this crucial area, when they reach a point of breakdown, powerful antagonists such as the government may be able to shut them down. The creation of the Nakamoto consensus was a key milestone. According to the Nakamoto consensus, each miner generates cryptographic hashes, but only if the hash contains a specific value.

The network’s nodes approve the associated block as genuine if it has a certain number of leading 0s. This Mining or Proof-of-Work are other terms for the same procedure.

It’s as basic as installing apps, synchronizing the blockchain, and using the machine’s computing resources to hunt for hashes to participate in the Proof-of-Work procedure. The frequency at which these hashes may be produced determines the likelihood of creating a block. Mining is a capital-intensive competitive game in which participants want to achieve the least price through economies of scale, because that is essentially a function of the machine’s processing capability and the energy used in the process. The benefit of mining is that the network can be trustworthy as long as honest miners hold a majority of the hashing power.

An adversary would have to commit a significant amount of resources to seize ownership of a bulk of the hashing power if they intended to interrupt the network. This guarantees the network’s security.

The far more prominent cryptocurrencies to date, such as Bitcoin and Ethereum, are based on Proof-of-Work. Notwithstanding this track record, Proof-of-Work has some important drawbacks. For many years, these constraints have fueled research into alternate Sybil resistance methods, most notably Proof-of-Stake.

Proof-of-Stake (PoS) is a concept that encompasses Sybil resistance techniques which use indigenous cryptoassets as collateral or leverage to decide enrollment in a blockchain network’s consensus protocol.

Collateral is derived first from medieval Latin collateralis, which comes from the words col- “together with” and lateralis (from latus, later) — “side,” implying that collateral is something committed in parallel to a contract’s principal obligation. The key duty for participating nodes in Proof-of-Stake is to obey the system’s rules scrupulously, which is guaranteed by offering up indigenous cryptocurrency tokens as a security deposit — the leverage.

Validators are nodes that operate the system’s software and are affiliated with private keys. To stay in tune with other participating parties, they arrange and validate transactions, communicate with one another, and modify their ledger. Validators in Proof-of-Stake networks are covered by leverage in the form of cryptocurrency tokens (“stake”), as detailed above. By selecting reliable validators and raising the cost of a prospective attack, token holders who stake (“stakers”) boost the network security. They are compensated with tokens proportional to their stake backing (“staking rewards”). Other criteria, such as net worth, have an impact on the size of these awards.

Tezos, Cosmos, Algorand, EOS, Stellar, Hedera Hashgraph, Solana, Celo, Keep, Terra, Ontology, TRON, Neo, and ICON are among the popular networks that use a Proof-of-Stake method. Ethereum 2.0, Polkadot, Cardano, Chainlink, Dfinity, NEAR, NuCypher, Oasis, Coda, SKALE, and AVA are just a few of the well-funded projects that are slated to launch with or incorporate some kind of PoS. The market valuation of real PoS networks has already surpassed 10 billion dollars at the time of writing.

To enroll validators in the consensus process, all Proof-of-Stake protocols require collateral to be kept in escrow managed by the network. Should the linked validator observably break from the protocols’ rules (“slashing”), the staked collateral can be confiscated in most protocols. This method is meant to deter network assaults such as double-signing (signing two different blocks of transactions at the same height). Avalanche and Ouroboros, for example, do not use slashing and instead rely exclusively on honesty assumptions.

Ultimately, delegation is a fundamental notion in many Proof-of-Stake solutions. This phrase relates to token owners’ capacity to delegate their staked collateral’s voting rights to an organization that will manage the validator architecture on their behalf. Delegation is integrated into the basic protocol in several situations (e.g., Cosmos and Tezos), while smart contracts are used in others (e.g., Ethereum 2.0 and NEAR).


Persistence protocol is built around Proof-of-Stake mechanism with pSTAKE being Persistence liquid staking solution because Proof-of-Stake has a number of benefits over Proof-of-Work when it comes to safeguarding decentralized networks:

Faster and Absolute Finality: In PoS networks, a transaction is irreversibly recorded in the ledger in a fraction of the time it takes in traditional networks. The user experience of engaging in the decentralized economy is vastly improved as a result of this. It also facilitates interoperability between chains.

Higher Transaction Throughput: PoS protocols can expand to large transaction throughput, making them ideal for powerful computational or high-interaction applications.

Environmental sustainability: To perform Proof-of-Work computations, PoS does not necessitate the operation of specialized large-scale data centers. Decentralized networks’ energy usage and CO2 emissions are drastically reduced as a result of this.

Economic Incentives Have a Larger Design Space: The ability to program economic incentives into PoS protocols allows game theoretic designs to be more resilient to attacks and efficient in terms of what is paid for the security and computing delivered.

In Proof-of-Stake networks, the majority of rewards go to token holders who stake, with only a small portion going to validators. As a result, the annual cost of safeguarding Proof-of-Stake networks is typically less than 1%.

Let’s have a look at the two main constraints that Proof-of-Stake protocols place on staking assets:


Staking assets are used as collateral in Proof-of-Stake networks to enroll validators in the consensus protocol. This means that assets are staked but retained in escrow on the system while they are staked. As a result, while staked assets are being used to safeguard the network, they are unreachable to token holders. This has been the case for all PoS protocols so far.

The deposited collateral is also utilized to assure the right behavior of validators in PoS networks with slashing. Staking assets act in the same way to a security deposit paid into a limited account by a renter before relocating into a rental unit in those networks. The network has access to the collateral to enforce penalties, as the landlord will be able to draw from it to compensate for breaches.

Unbonding Period

An additional slashing constraint in most PoS protocols is that a token holder can only exit a staking position after a certain amount of time has passed. The unbonding period is the most frequent name for this period. Some protocols impose minimum staking periods, with stakes maturing and being refundable only when the time period specified has passed.

To learn more about Proof-of-Stake, click the following:

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