Let’s get back to our TBCC Glossary. The next terming is PoS, or Proof-of-stake.
In 2012, Sunny king and Scott Nadal from the Peercoin project presented Proof of Stake (PoS) — an alternative to PoW and a solution to the problem of high electricity costs for bitcoin mining. However, the idea of PoS was mentioned back in 2011 on the Bitcointalk forum. Instead of mining in PoS, network participants freeze a certain number of tokens in their wallets. After that, the algorithm selects the next block producer among the participants, depending on the bid amount. In this way, participants support integrity not with computing costs, but directly with assets within the network.
While using this method, the block generation algorithm does not depend on the hardware capacity, but it is more likely that the block will be formed by the account that has a larger current balance. For example, a participant who owns 1 % of the total amount will generate 1 % of new blocks on average.