Why is Proof-of-Stake better than Proof-of-Work?

As Ethereum Merge upgrade is drawing closer, the blockchain and crypto world is looking forward to a new beginning for the second largest cryptocurrency. The best staking crypto exchanges have already started receiving increasing traffic of ETH stakers – and the numbers are only going to rise in the coming months. Major reason why the whole world is waiting for Merge and Ethereum 2.0 is that the upgrade will finally transcend the Ethereum blockchain to cutting-edge Proof-of-Stake consensus mechanism from the traditional Proof-of-Work mechanism. Check out more at Multibank.io.

Backed by a more advanced and eco-friendly infrastructure, PoS blockchain offers a smarter, cleaner, faster, and greener infrastructure over the PoW counterpart.

What are PoW and PoS?

A blockchain network needs uniform consensus from all the nodes (aka computers on its network) while verifying and adding new blocks to the existing chain. However, the type of consensus mechanism used tends to differ from one blockchain to another. The traditional ones, such as Bitcoin blockchain, use Proof-of-Work blockchain. While the more modern blockchains like Cardano, Solana, etc, use more advanced Proof-of-Stake blockchain. Although Ethereum was originally launched on Proof-of-Work blockchain yet the Ethereum team is shifting the Ethereum mainnet to PoS chain. The complete merge will be completed by 2023 that will welcome the birth of Ethereum 2.0.

How does PoW work?

The PoW consensus mechanism validates new blocks based on the process of mining.

In mining, a set of miners have to resolve a complex mathematical puzzle to guess the right hash rate. The first one to arrive with the right guess will be awarded with new coins.

But, it must be mentioned here that PoW mining is an extremely energy-intensive process that makes PoW blockchains dangerous for the environment. Certain Countries have banned all mining activities across the nation on the grounds of serious environmental concerns.

How does PoS work?

The PoS system works based on the principle of staking.

In this case, the coin holders pledge or lock-in a certain sum of coins to the blockchain to help the blockchain with validation of new blocks. The blockchain will choose a staker on a random basis- however, the number of coins staked by an aspiring staker plays a key role in determining the selection of stakers. Put simply, stakers who are willing to pledge a higher volume of coins will be given more preference over other stakers. During staking, the stacked coins will stay locked up and will only be freed after the staking period is over. In return, the blockchain will reward the staker with new coins. You can sign up with the best staking crypto exchanges for staking rewards.

It’s to note here that some PoS coins follow a set entry cap. It implies you will have to deposit a certain amount of that coin into its blockchain to participate in staking. For example, for ETH staking, the minimum entry point is 32 ETH. However, if 32 ETH is unaffordable for you, you can always join staking pools. It’s always better to participate in staking through a staking platform than doing it independently. If you perform staking through best staking crypto exchanges or any other staking portals, you won’t have to shell out for expensive staking infrastructure.

Advantages of PoS mechanism over PoW mechanism

If you take a look at the crypto world, you will find that the majority of the new coins or tokens are built on PoS blockchains. There are a bunch of great reasons why developers today are increasingly taking to PoS blockchain over the outdated PoW blockchain.

  • Less energy consumption

As mentioned above, mining is an extremely energy-intensive process. Modern miners use specialized ASIC mining rigs that consume immense energy, resulting in a huge carbon footprint. PoS, on the contrary, does not use a huge volume of energy and hence is always more eco-friendly. The upcoming Ethereum 2.0 blockchain will consume 99% less energy thanks to its PoS infrastructure compared to its existing PoW blockchain.

  • Faster Transaction

Another problem with PoW blockchain is slower transaction speed that eventually triggers the issue of network congestion and higher gas fees. Currently, the Ethereum (PoW) blockchain can only process up to 30-45 TPS. But, after the Merge upgrade and birth of Ethereum 2.0. the  newly developed PoW blockchain will be able to offer an awe-inspiring 100,000 TPS.

  • More eco-friendly

The PoS blockchain is always more eco-friendly than the PoW counterpart as the former does not consume high volume of energy and doesn’t leave a heavy carbon footprint.

  • Opportunity for passive income

Another amazing benefit of PoS blockchains is that these platforms offer a grand passive income opportunity for their PoS coin holders. This way, PoS HODLers can utilize their idle PoS coins for another avenue of income- and that too without any sort of active effort from their side. The only thing they would need to do here is to have their coins locked-in for a certain period of time. This is something you will never be able to avail with PoW blockchains.

Where to execute crypto staking?

There are various platforms where you can perform staking and enjoy passive income. Stakers enjoy around 10-12% APY (Annual Percentage Yield) with staking rewards. The most popular avenue for crypto staking is crypto exchanges. The best staking crypto exchanges even offer flexi staking periods so that you can take out the stacked coins if required. However, you will receive better staking rewards if you keep your coins locked-in till the completion of the staking period.

Some crypto exchanges might charge commission or staking fees. However, some of the best staking crypto exchanges do not charge staking fees at all. However, the range of staking rewards might vary from one exchange to another. So, check the different staking rewards offered by various exchanges for your chosen coin to find the most compatible best staking crypto exchanges for your staking venture.

Other than the best staking crypto exchanges, you can carry staking at DeFi platforms, crypto cold wallets, and also staking pools. However, as staking pools use shared resources, the reward will also get divided among all the participants. For more Information : https://ultimatestatusbar.com/

Author Bio:

This is Aryan, I am a professional SEO Expert & Write for us technology blog and submit a guest post on different platforms- Technoohub provides a good opportunity for content writers to submit guest posts on our website. We frequently highlight and tend to showcase guests