Proof of Stake (PoS): Pros and Cons of Staking as a Tool For The Passive Income
Introduction All the cryptocurrency coins are divided into 2 main logical types: Proof of Work (PoW) and Proof of Stake (PoS). Proof of Stake (PoS) concept states that users can mine or validate block transactions depending on how many coins the user has (holds) in a personal account. The more coins the miner owns, the more mining power the user has. Proof of Work (PoW) concept states that users mine with their own computers and get coins as a reward. This is the way the transactions are confirmed. There are also some coins, which combine PoW and PoS. So, there are 3 possible ways:
- Only PoS coins, that are "pre-mined" and just were sold during the IPO;
- Use of PoW and PoS hybrid;
- Use of PoW only as a distribution method until a certain time and then use only PoW.
- Dash - one of the first cryptocurrencies that introduced the mechanism of staking.
- Decred (DCR) - declares decentralized management as its top priority, using the hybrid PoW / PoS mechanism.
- The NEO project, often called the Chinese Ethereum, also offers its users the possibility of staking.
- Zcoin (ZCX) is oriented to increased user privacy and gives favorable staking conditions (17% per annum).
- Tezos, which uses the Liquid Proof of Stake algorithm and is positioned as the network protocol for safe and time-tested smart contract systems. Also, Ethereum (ETH) - one of the most popular currencies in the world, will soon switch to PoS too. Ethereum has a unique algorithm for finding consensus among all cryptocurrencies. It combines two ways: the network began functioning from the classic Proof-of-Work, through a series of hard forks, is gradually moving to the Proof-of-Stake. Don’t forget about the market’s volatility, check the comparison table.
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