The next iteration of Ethereum known as Serenity will operate through the Proof-of-Stake algorithm. This migration is to overcome some of the biggest shortcomings of the current algorithm of Proof of Work. This included the enormous amount of electricity consumption, lower transaction rate, and thereby, low scalability and, of course, the tendency towards centralization.
As the name suggests, Proof of stake is a stake-based algorithm that takes into account the amount of cryptocurrency the participants are ready to stake with the network. This turns them into a validator. They have two roles, first to propose the next block for the chain, and second to validate and vote on the block proposed by other validators. A validator is chosen randomly by the algorithm to propose a block. The validator then checks the transaction in the block and puts it forward for voting by other validators. If the block gets approved it becomes a part of the blockchain and the proposer gets the transaction fee as the reward. If the block fails to hold ground in the voting, it is rejected and the proposer loses some of its stakes.
Proof of Stake algorithm helps in overcoming all the above-mentioned hurdles. It consumes a fraction of electricity that is consumed by Proof of Work and offers an exponentially high transaction speed. Moreover, it creates a system that discourages centralization, punishes undue manipulation, and leaves the 51% attack needless.
Our podcast covers the topic in a concise yet comprehensive manner. Here, we discuss what is a consensus algorithm and the role it plays in the blockchain setup. Then, we discuss what is Proof of stake and the positives it offers. Listen to our podcast today!