The impending shift of Ethereum's blockchain from Proof-of-Work to Proof-of-Stake has directed a lot of the market's attention to staking. As mining becomes commercialized, Proof-of-Stake is pushing staking as the primary form of passive income. The evolution of blockchain technology is gradually altering its architecture to feature more efficient and environmentally conscious mechanisms like PoS.
As a consensus mechanism, PoS is rapidly gaining traction as a significant element in any blockchain network. The proof is a large number of crypto exchanges and platforms that now support PoS assets and offer staking services. New variations of the PoS mechanism are a positive sign for the future of staking.
The Proof of the Matter
In a Proof-of-Stake, stakeholders stake their native crypto assets as collateral to gain opportunities for creating the next block. These opportunities get primarily influenced by the amount of token held in the network by the user. Holding funds to support the operations of a system (staking) gets incentivized with rewards.
The recent prevalence of PoS in securing blockchain networks is not without merit, including lower operational costs, lower ecological impact, raised scalability, and more substantial crypto incentives. PoS systems rely on the generated incentives to encourage honesty and proper behavior on the network. However, positive reinforcement isn't all the mechanism can offer.
Stake and Secure
Every consensus mechanism has a security protocol to protect itself from malicious behavior, and Proof-of-Stake is no different. All PoS systems require users to stake a certain amount of their assets in the network to become block validators. Preventing users verifying fraudulent blocks, penalty protocols such as seizing the validators staked assets are applied. Furthermore, the systems avoid 51% attacks by setting the amount needed to stake 51% so high that it is no longer beneficial.
The Proof in the Numbers
The crypto assets supporting staking cumulative market capitalization is worth $12.6 billion, with around $8 billion in stakes. The top five staking networks have the majority of their stakes locked up; Tezos at 77%, Cosmos at 735, Decred at 51%, Synthetix at 81%, and Waves at 53% according to StakingRewards. When Ethereum finally is the PoS family, it is expected to offer staking rewards of 3.7%. More staking rewards to look out for include Polkadot at 5%, Cardano 3.7%, and Matic at 10%.
Why The Future of Crypto Lies in Staking
There is a wide variety of PoS coins scheduled to launch in the coming months, including Ethereum 2.0. Analysts are predicting that the new year will see a growth of PoS oriented projects and increased staking. An apparent reason for this shift is the opportunity of earning passive income in staking. A lot of cryptocurrencies using the PoS system are projecting high reward rates for their users. According to StakingRewards, the highest yields include products such as Synthetix at over 50%.
Furthermore, constant inventions and better variations in the system promise more efficient experiences. The PoS assets taking up these variations give users an array of choices. Gone are the days when all assets fell under only one consensus.
Under PoS, a more significant number of users have the opportunity to become validators. The threat of centralization is almost non-existent, with the high costs of 51% attacks. An accessible algorithm is bound to get popular among beginners and experts in the industry.
Staking is as easy as locking coins in a unique wallet. A simple process is the beginning of becoming a part of a PoS run network. The reduced barriers in joining and actively participating in a network eliminate any threat of excessive energy expenditure. An environment-friendly way to run a system is more sustainable in the long run.
Endnote
The Proof-of-Stake mechanism and subsequent Staking is forwarding the nature of blockchain technology, making it both efficient and scalable. Having an environment friendly, decentralized, and rewarding consensus mechanism is what the industry needs.
There are risks involved with locking up assets in PoS, but what investment doesn't have chances? The passive income and other perks of the system make it all worthwhile.
So join MyCointainer today to start earning from holding your assets.
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Christophe WILHELM
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Source: Future of PoS
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