- dApp(Decentralized Application)
- 51% Attack
- Smart Contract
- Soft Fork
- Hard Fork
- Token Economy
- Consensus Algorithm
- Digital Signature
- Public key
- Private key
- Block Height
- Merkle Root
- Time stamp
- UTXO (Unspent Transaction Output)
- ERC20 Token
PoS is a type of consensus algorithm that participates in decision making of block creation by allocation of stake ratio of coins. Adding to this, a verification node with a stake can validate the blocks and vote on the block decision (one vote per one stake, not one person). The block, which receives many stakes from verification nodes, links to the main chain.
In PoS-based cryptocurrencies, the creator of the next block is chosen stochastically random via the time of staking and the amount of stakes. To avoid the richest node being selected only, the other various options such as 'a random block selection', 'a selection via coin age' were added in selecting the node.
The good thing with PoS is that there is no cost for mining, since it doesn't work that way. Since the verification is done by the one who has the most stakes, the stake owner won't try to modify the blockchain or make the system failure, because this will cause a slump in coin value. In psychology of economic behavior's point of view, the more the node possesses the stake, the lower the possibility the node disgraces the value of the system.
However there is a weak point in PoS as well. There is no cost for the verification node to pay in PoS. If blocks are created simultaneously, the nodes can agree with all nodes.
As shown in the picture above, when block A and B with different transactions are created at once, the node with a large number of stake can verify both chains together and build those chains long, as if a false chain is authentic. It is favorable for the verification nodes to verify both blocks, which are created simultaneously. Because there is a possibility to lose a reward when it verifies one node only and other blocks will link to the main chain. This fatal error of PoS is called 'Nothing at Stake', which means 'nothing to lose' in verifying any blocks.