What is proof of stake?

What Is Proof of Stake?

Proof of stake (PoS) is a way to secure a blockchain without mining. Validators lock (stake) the chain's native coin. The protocol chooses who can propose the next block, often based on stake size and other factors. If they act honestly, they earn rewards. If they cheat, they can lose part or all of their stake.

How It Differs From Proof of Work

PoW uses electricity and hardware to compete; PoS uses economic stake. PoS uses much less energy. Ethereum and many other chains use PoS. Validators need to run a node and keep it online to earn rewards.

Staking for Users

If you hold a PoS coin, you can often "stake" it (lock it in the protocol or with a validator) and earn a share of rewards. Rates vary by chain and demand. Staking can have lock-up periods. In India, staking rewards are generally taxable as income when received or when you sell.