What Is Proof-of-Stake (PoS)? A Beginners Guide

Proof-of-Stake is a widely used blockchain consensus mechanism that powers major coins like Ethereum, Cardano, and Solana. Its designed to be faster, greener, and more accessible than traditional Proof-of-Work systems. In this guide, well break down how Proof-of-Stake works, its pros and cons, and how you can start staking in just a few steps.

What is Proof-of-Stake (PoS)?

Proof-of-Stake is a blockchain consensus mechanism. It selects validators based on how many coins they hold and lock up. Theres no mining. Instead, your financial commitment earns you the chance to validate transactions.

This idea was first proposed in 2011 on Bitcointalk. PoS is far more energy-efficient than Proof-of-Work (PoW). It removes the need for powerful mining equipment, and opens the door for more users to take part in securing the blockchain.

Proof-of-stake: consensus mechanism definition.

What was the point of PoS?

PoS was designed to fix some of the biggest problems with PoW. In short, PoS was born to be a greener and more accessible way to keep blockchains secure.

Mining requires enormous energy. It also relies on expensive, specialized hardware with enormous computing power. This also often leads to centralization.

In 2021, Bitcoin mining consumed over 200 terawatt-hours (TWh) of electricity annuallycomparable to the energy usage of some countries. By 2024, this figure remained significant, with estimates ranging between 120 TWh and 175 TWh per year. This consumption is similar to the annual electricity usage of nations like Poland or Sweden.

Bitcoin energy consumption worldwide. Energy usage peaked near 200 TWh in 2022, dropped, then rose again to over 175 TWh by early 2025. Chart: Statista

PoS, first implemented by Peercoin in 2012, offered a better way. It promised similarly robust security but with a lower environmental impact. And it aimed to make participation in network security more democratic by removing the need for expensive equipment.

Why PoS is gaining popularity over Proof-of-Work (PoW)

Over the past few years, PoS has rapidly gained popularity and is now the dominant choice for new blockchains. There are several reasons for this shift from PoW. PoS solves many issues PoW cant. Heres why:

Energy efficiency: PoS networks consume far less energy than PoW. When Ethereum switched from PoW to PoS in 2022, it cut its energy usage by about 99%. In fact, the reduction was closer to 99.8% when fully measured. Thats a massive improvement.
Accessibility: Becoming a validator in PoS systems is much easier. You dont need expensive mining rigs. You just need coins to stake. This lowers the barrier to entry, and lets more people participate.
Scalability and innovation: PoS is considered more adaptable and scalable in the long run. It can support upgrades like sharding to greatly increase throughput. These help networks process more transactions and grow efficiently. Thats something PoW systems struggle with.
Community and investor preference: As crypto goes mainstream, there is broader support for greener and more future-proof blockchains. Major platforms and exchanges have integrated staking, making it simple for even new users to stake coins in seconds. Over $130 billion in value was locked in staking in late 2024. The growth of staking demonstrates strong community trust in PoS.

Proof-of-Stake in 6 Stepsfrom staking to slashing.

How Does Proof-of-Stake Work?

At its core, Proof-of-Stake replaces the brute-force competition of mining with a lottery among coin holders. The exact mechanics can vary by blockchain, but the typical process involves a few key steps: locking tokens, selecting validators, validating and creating blocks, rewarding good actors, and occasionally penalizing bad actors. Heres how each part of this process works:

Locking tokens

To participate in PoS and have voting power, a user must lock up some of their cryptocurrency as a stake. This is often done via a smart contract or special wallet function.

By locking tokens, you signal your commitment to the network. For example, on Ethereum you must stake 32 ETH to activate a validator node, while other networks allow smaller amounts or delegation to staking pools. Once staked, those coins are usually frozenyou cant spend or move them for a certain period. This stake serves as collateral: if you follow the rules and help secure the network, youll get it back with rewards. But, if you try to cheat, you could lose some of it.

So basically, staking = locking up coins as collateral.

Validator selection

From the pool of stakers, the network needs to pick who gets to add the next block of transactions. PoS uses pseudo-random selection algorithms to choose a validator for each new block. Unlike PoW where the winner is whoever solves a math puzzle fastest, in PoS the winner is often selected based on a combination of factors:

Stake size: generally, the more coins you stake, the higher your chances of being picked. This makes sensebig stakeholders have more to lose and are heavily invested in keeping the network honest.
Staking duration (Coin Age): some networks add factors like how long the coins have been staked or whether the validator recently produced a block.
Randomization: the process includes randomness so it isnt entirely predictable or always favoring the richest. This creates a more even distribution of block producers over time.
Other factors: each blockchain can tweak the formula. Some use delegated voting or reputation systems. But at the end of the day, one staker (or a small group) is chosen as the validator for the next block.

In essence, the network runs a lottery where your stake equals the number of lottery tickets you have, and a random draw picks the validator for the next block.

Creating and validating new blocks

Once chosen, a validator verifies pending transactions. They bundle these into a new block. Then they send that block to the network.

Other validators double-check it. If it looks good, they confirm it. After that, the block is added to the blockchain.

This process is much faster and energy-light compared to PoW, because its just messages and digital signatures flying aroundno heavy computation. The system is secured by the assumption that the majority of staked coins are held by honest participants. If the chosen validator tries to add an invalid block, the network will reject itand that validator risks losing their staked coins (as well see next).

Receiving rewards

Why would someone lock up their coins and run a validator node, anyway? Rewards! In Proof-of-Stake blockchains, validators earn economic incentive for helping process transactions and keeping the network secure.

Each time a validator is chosen and creates a block, they receive:

Transaction fees from the included transactions (just like in PoW blockchain networks).
Newly minted coins in some networkscalled a block subsidy. Others rely only on fees.

For instance, validators on Cardano or Binance Smart Chain earn regular rewards for each epoch. On Ethereum, rewards come in ETH for proposing and attesting to blocks. These include priority fees from users.

The distributed database model of PoS ensures rewards go to those who play by the rules. Over time, staking rewards can grow your portfolio. Many investors treat it as a form of passive incomelike earning interest while supporting the network.

Penalties

PoS doesnt just reward good actors. It also penalizes bad ones. The coins you stake act like a security deposit. If you break the rules, the network can slash your funds. Penalties in PoS systems include:

Slashing for misconduct: validators who sign fraudulent blocks or sign two different versions of the blockchain can lose part of their stake. For example, Ethereum slashes validators who create conflicting attestations. That makes cheating too expensive to be worth it.
Downtime penalties: validators can also be punished for going offline. Networks like Polkadot slash both inactive validators and those who nominate them.
Unbonding delays: if you stop staking, you often have to wait days or weeks before your coins unlock. This delay allows the network to catch any final rule-breaking.

Together, these penalties protect the system. In fact, the security of PoS rests on a simple principle: no one wants to hurt the network, because it would hurt their own staked investment. After all, verifying transactions honestly is safer than being slashed. Even a 51% attack becomes unlikely when the cost of cheating is so high.

With the basic idea of PoS covered, lets explore what makes it attractive and what concerns or challenges it faces.

Benefits of Proof-of-Stake

PoS brings clear advantages over PoW. First, it uses far less energy. We already discussed that Ethereums switch to PoS reduced energy consumption by over 99%. Other networks like Cardano and Tezos also use only a fraction of the energy of a typical PoW network. Unlike mining, PoS doesnt require computational power to solve a complicated cryptographic puzzle.

You dont need expensive hardware either. A basic computer is enough to run a validator. This lowers costs and opens the door for more people to participate, not just those who can afford mining farms.

This accessibility encourages decentralization. In PoS systems, anyone with coins can stake. Thousands of independent operators now help secure chains like Cardano. In contrast, mining power in PoW systems often concentrates in large pools.

PoS also improves scalability. With no hardware bottlenecks, networks can easily add validators. That leads to faster block times and higher throughput. Ethereums PoS consensus mechanism even supports sharding for parallel transaction processing.

Security is strong too. Honest validators earn rewards. Bad actors risk losing their stake. That economic pressure protects the network. And attacking a PoS system costs as much energy in tokens as attacking PoW does with hardware.

Finally, PoS is adaptable. Developers can modify it to fit many use cases. Variants like Delegated Proof-of-Stake, Liquid Proof-of-Stake, or Nominated PoS already power many networks.

Challenges of Proof-of-Stake

PoS has many strengths, but it also comes with trade-offs. One major risk is centralization. Large holders earn more rewards and can grow their influence. If staking services or exchanges control too much, they may dominate the network.

High entry barriers are another issue. Some networks, like Ethereum, require large minimum stakes to run a validator. This forces smaller users into pools, which could concentrate control.

Smaller networks face greater risks of 51% attacks. If a coin is cheap or not widely staked, it may be easier for attackers to take control by buying up tokens.

Theres also the nothing at stake problem. Validators could sign blocks on multiple forks with no cost. Most PoS systems now counter this with slashing.

Slashing itself introduces risk. If you run your own validator and make a mistake (like misconfiguring your node or going offline), you might lose a portion of your stake. Even delegators can be penalized in some networks. For example, Polkadot nominators can get slashed if the validator they back misbehaves.

Another concern is liquidity. Staked coins are often locked, and users may have to wait days or weeks to access them. If the price drops during this time, it can lead to losses.

Lastly, PoS is complex. Its security depends on careful economic design. Bugs or poor governance can cause failures or require social intervention to fix.

While PoS solves many of PoWs problems, it adds new challenges that must be managed carefully. The best networks strike a balance through smart design and strong communities.

Proof-of-stake: key benefits and trade-offs.

Criticisms

PoS has vocal critics, especially from the PoW camp. Here are some common concerns:

The Rich Get Richer

Staking rewards scale with how much you stake. So big holders earn more, compounding their wealth. Critics say this mimics traditional finance. It could lead to validator oligopolies, unlike PoW, which requires a constant input of external resources.

Security Doubts

PoW has a longer security track record. PoS is newer. Thats why some argue PoS is less battle-tested than PoW.

Recovering from attacks may also be harder in PoS, since attackers with majority stake hold voting power. Restoring order after a large-scale attack might require human coordination.

Fairness Concerns

In PoW, energy costs create real-world friction. PoS relies on economic models and initial token distribution. If founders or early adopters hold much of the supply, they may have permanent control.

That said, many of these issues are actively debated. Some argue PoW has centralization too, with a few mining pools dominating Bitcoin. And PoS tools like slashing and governance help maintain fairness. As of 2025, PoS has proven itself on networks like Ethereum. But its smart to keep an eye on how it evolves.

Popular Proof-of-Stake Cryptocurrencies

Many leading blockchains now use Proof-of-Stake. Each has its own approach. Heres a quick look at some of the biggest names.

And dont forgetyou can confidently buy the listed coins and 1,000+ other assets on Changelly.

Ethereum 2.0

Ethereum moved from PoW to PoS in 2022 in a major upgrade called The Merge. This cut its energy use by over 99%, replacing miners with over 500,000 validators. Validators are rewarded in ETH for proposing and attesting to blocks using a system called Gasper. The move also enabled future upgrades like sharding for better scalability.

Users can stake directly with 32 ETH or join a pool with less.

Ethereums transition proved that even the second-largest blockchain can go green and scale with PoS.

Cardano (ADA)

Known for its academic roots, Cardano uses Ouroborosa PoS protocol backed by peer-reviewed research. Staking is simple and liquid. You can delegate ADA without locking it. Rewards are modest (~4-5%), and the network supports decentralization through many independent pools.

Polkadot (DOT)

Polkadot secures multiple chains with its Nominated Proof-of-Stake system. Validators run nodes; nominators back them by staking DOT. Both share the rewardsand the risk. Polkadots system encourages careful selection and broad participation. Its staking offers high yields (~10-14%) but includes a 28-day unbonding period.

Solana (SOL)

Solana pairs PoS with a Proof-of-History consensus mechanism for fast, low-cost transactions. It handles high throughput (50,000 TPS in tests). SOL holders delegate coins to validators. But running a node requires serious hardware. Staking rewards are around 6-7%, with short unbonding.

Tezos (XTZ)

Tezos features on-chain governance and a Liquid PoS consensus mechanism. Validators (bakers) need 6,000 XTZ. Delegation is simple and doesnt lock funds. The network updates frequently and yields ~5% annually.

Cosmos (ATOM)

Cosmos secures an ecosystem of different blockchains. Its PoS uses Tendermint BFT with fast finality. Delegators choose validators and can earn up to 15-20% APY. Theres a 21-day unbonding period.

Others

Tron, Algorand, Avalanche, NEAR, Elrond, and Polygon all use PoS variants. Some focus on speed, others on governance or interoperability. But they all rely on staking to secure their networks.

How to Start Staking (Beginner-Friendly Guide)

Staking today is beginner-friendly and accessible. First, choose a Proof-of-Stake coingood options include ADA, SOL, ATOM, XTZ, DOT, and ETH. Check the reward rate, lockup period, and minimum stake. For example, solo-staking Ethereum requires 32 ETH, while ADA or XTZ can be staked with just a few coins.

Now, you need to buy these coins. You can buy crypto on Changellywe offer fast and secure transactions.

Next, pick your staking method:

Exchange staking (e.g., Binance, Coinbase) is the easiest. Just hold your coins and click Stake. The platform handles the rest.
Wallet delegation lets you stay in control. Use apps like Yoroi (ADA) or Keplr (ATOM) to delegate to a validator.
Running a validator offers full control and higher rewards, but its technical and risky for beginners.

Start small, use trusted tools, and read up on your chosen coins rules. Understand lockup times: some assets (like DOT) have unbonding periods, while others (like ADA) are liquid.

Rewards vary by networksome are paid automatically, others must be claimed. Monitor your validators performance and stay updated.

Final Words

In the end, PoS represents the crypto communitys drive to improve and innovate. It flips the script from brute-force competition to a model of cooperation and trust.

From its origins as an idea on a forum, PoS now secures some of the biggest crypto networks in the world. As with any technology, it has its pros and cons, but its continuing to evolve rapidly. As blockchain adoption grows, Proof-of-Stake will likely play a central role in securing the decentralized future in an eco-friendly way.

If youre interested in crypto beyond just trading, staking is a great way to get involved and learn by participating. You can earn passive rewards and contribute to the health of the network. Just remember to stay informedchoose reputable projects and methods to stake, and be mindful of the risks along with the rewards.

FAQ

What is Proof-of-Stake in simple terms?

Proof-of-Stake is how blockchains stay secure without needing miners to solve cryptographic puzzles. Instead, people stake tokenslocking them up for a chance to be chosen to add the next block. If selected, they earn rewards. Its like a lottery: more tokens mean better odds, but cheating risks losing your stake.

What was the first Proof-of-Stake coin?

Peercoin (PPC), launched in 2012, was the first PoS coin. It used a hybrid PoW/PoS model to start, then relied on PoS for security. Peercoin showed that blockchains could run with very little energy. Later, projects like NXT and BlackCoin followed.

Why use Proof-of-Stake?

PoS is more eco-friendly than PoW. It avoids energy waste and doesnt need expensive mining gear. Anyone with coins can stake, validate blocks, and help run the network. PoS also supports faster upgrades and better scalability.

Which PoS coins are best for beginners to stake right now?

If you are only considering staking, start with easy and reliable coins. ADA (Cardano) has no lockup and ~4-5% rewards. SOL (Solana) offers 6% and quick unbonding. ATOM (Cosmos) is simple and earns up to 15%.

For details, check our full article: Best crypto to stake.

Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the authors opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.

The post What Is Proof-of-Stake (PoS)? A Beginners Guide appeared first on Cryptocurrency News & Trading Tips Crypto Blog by Changelly.

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